In Search of the Perfect Investment

My friend is having his greatest year ever. He’s in real estate. He’s a brilliant salesman. He convinces tenants that his building is where they want to spend the next ten years of their lives. Then he sells the cash flow and/or the building to a big institution which wants the “guaranteed” income stream.

There is only one lesson here. It makes sense to work for yourself, to trust in your own skills and energies and to create your own wealth. That was my experience also. For me, it ran out when I sold the business. For him, he’s still buying, fixing and selling commercial real estate.

It’s a wonderful world when your destiny is in your own hands.

The lesson from HP. Companies rarely do well when the founder leaves/dies. The best investor rule is sell and sell FAST. When a new CEO comes in, the pressure to do something dramatic is immense. Carly Fiorina, a third-rate executive from AT&T (pre-Cingular days) bought Compaq in one of the dumbest corporate acquisitions in business history. She couldn’t manage the mess she created and the board canned her. It brought in Mark Hurd who replaced HP’s erstwhile creative, friendly, nice-place-to-work atmosphere with one of extreme cost-cutting and fear-for-your job. Under him the best people left. The worst thing about Carly and Mark is  they both exploited HP for their own careers, and, in Hurd’s case, to line his own pocket.

For example, Mark Hurd’s total compensation for 2008 (when the global economic crisis reached its nadir) was $43 million, making him the fourth-highest-paid CEO that year, even though H-P’s shares lost 29% that year. According to a Street.com story:

* This management team mandated that year that all Hewlett-Packard staffers would take a 5% pay cut for the year, and they boasted that they — as executives — would stand shoulder to shoulder with the staff by taking 10% pay cuts. They forgot to say that the executive cuts would be only on base salary and that they would more than make up for that on options, restricted stock units and other bonus goodies.

* In 2008, H-P shareholders paid $7,472 for travel expenses for Mark Hurd’s family to accompany him on business meetings. They paid $256,000 for Mark Hurd’s personal security detail that year. And each executive was able to use $18,000 worth of financial advice that year on the shareholders’ dime.

* Where it gets really interesting is that shareholders paid $136,000 for Mark Hurd’s personal use of the H-P private plane fleet in 2008. Furthermore, H-P “grosses up” this taxable benefit, so that Hurd — the guy who made $43 million in 2008 alone — didn’t have to pay any taxes for that private aircraft use. The filings also show that Hurd could take his spouse on the H-P aircraft whenever it was “requested by H-P” and that she got “grossed up” for that too.

* Michelle Leder of Footnoted also first reported in 2008 that Hurd had been “grossed up” $79,814 for taxes he had to pay as a benefit on meals with his family that were paid for by HP. Leder estimated that, in order to be “grossed up” by such a high amount, Hurd would have had total restaurant bills paid for by HP shareholders of more than $243,000.

Now he is leaving HP with a $50 million severance package ($12 million in cash, plus stock). Not bad for cheating on your expense reports. One has to marvel at the hubris to mess around with Jodie Fisher on company expense.

The whole episode has created great outcrying in Silicon Valley, Business Insider ran a piece, Wait A Minute — Why Does Mark Hurd Get $50 Million Severance When He Lied In His Expense Reports?

Here’s the chart of HP’s stock. Hurd joined HP in 2005.

My latest laptop — Lenovo’s ThinkPad X201. I’ve begged and groveled to buy this machine. The Intel i7 microprocessor was backordered. I finally got the machine. And I’ve wanted to write a testdrive for weeks. Lenovo’s latest 15% off sale is the impetus.

I love the machine:

But.. I never thought I’d write this. I’ve been hoisted by my own petard. This is my 27th laptop. I’ve always bought the latest, greatest and … fastest. I never thought I’d write this. This one is too fast, too powerful. If I touch a key for a micro-second too long, it will do the same thing two or three times — all in the blink of an eyelid. Hit erase for one email. In a nanosecond, three have been erased. It’s incredible and frightening. Can I recommend something this powerful? Maybe. For normal use, go with the slightly slower (and cheaper) i5 chip.

Lenovo gives you a lot of customizing options. I have both the pointing stick and the touchpad, as shown here. I don’t use the Touchpad, but you might. I am running Windows XP, but Windows 7 is OK if you’re starting from scratch. The solid state drive is nice (and fast), though pricey. In short I love the machine. Slowly, I’m getting used to its incredible speed. Update — I fixed the speed problem with a solution from genius Frank Derfler. See below in the comments.  If you have any questions, email me. Meantime, Lenovo’s site is here. Make sure you get the 15% off.

Hapiness is having fewer things. How about only 100 things? The New York Times lead its Sunday business section with “But will it make you happy?” The conclusion: maybe. Meantime, three  things are changing in happiness — strong relationships, having more experiences (and fewer goods)  and cocooning (vacationing at home). From the long piece:

On the bright side, the practices that consumers have adopted in response to the economic crisis ultimately could — as a raft of new research suggests — make them happier. New studies of consumption and happiness show, for instance, that people are happier when they spend money on experiences instead of material objects, when they relish what they plan to buy long before they buy it, and when they stop trying to outdo the Joneses.

If consumers end up sticking with their newfound spending habits, some tactics that retailers and marketers began deploying during the recession could become lasting business strategies. Among those strategies are proffering merchandise that makes being at home more entertaining and trying to make consumers feel special by giving them access to exclusive events and more personal customer service.

While the current round of stinginess may simply be a response to the economic downturn, some analysts say consumers may also be permanently adjusting their spending based on what they’ve discovered about what truly makes them happy or fulfilled.

“This actually is a topic that hasn’t been researched very much until recently,” says Elizabeth W. Dunn, an associate professor in the psychology department at the University of British Columbia, who is at the forefront of research on consumption and happiness. “There’s massive literature on income and happiness. It’s amazing how little there is on how to spend your money.”

CONSPICUOUS consumption has been an object of fascination going back at least as far as 1899, when the economist Thorstein Veblen published “The Theory of the Leisure Class,” a book that analyzed, in part, how people spent their money in order to demonstrate their social status.

And it’s been a truism for eons that extra cash always makes life a little easier. Studies over the last few decades have shown that money, up to a certain point, makes people happier because it lets them meet basic needs. The latest round of research is, for lack of a better term, all about emotional efficiency: how to reap the most happiness for your dollar.

So just where does happiness reside for consumers? Scholars and researchers haven’t determined whether Armani will put a bigger smile on your face than Dolce & Gabbana. But they have found that our types of purchases, their size and frequency, and even the timing of the spending all affect long-term happiness.

One major finding is that spending money for an experience — concert tickets, French lessons, sushi-rolling classes, a hotel room in Monaco — produces longer-lasting satisfaction than spending money on plain old stuff.

“ ‘It’s better to go on a vacation than buy a new couch’ is basically the idea,” says Professor Dunn, summing up research by two fellow psychologists, Leaf Van Boven and Thomas Gilovich. Her own take on the subject is in a paper she wrote with colleagues at Harvard and the University of Virginia: “If Money Doesn’t Make You Happy Then You Probably Aren’t Spending It Right.” (The Journal of Consumer Psychology plans to publish it in a coming issue.)

Thomas DeLeire, an associate professor of public affairs, population, health and economics at the University of Wisconsin in Madison, recently published research examining nine major categories of consumption. He discovered that the only category to be positively related to happiness was leisure: vacations, entertainment, sports and equipment like golf clubs and fishing poles.

Using data from a study by the National Institute on Aging, Professor DeLeire compared the happiness derived from different levels of spending to the happiness people get from being married. (Studies have shown that marriage increases happiness.)

“A $20,000 increase in spending on leisure was roughly equivalent to the happiness boost one gets from marriage,” he said, adding that spending on leisure activities appeared to make people less lonely and increased their interactions with others.

According to retailers and analysts, consumers have gravitated more toward experiences than possessions over the last couple of years, opting to use their extra cash for nights at home with family, watching movies and playing games — or for “staycations” in the backyard. Many retailing professionals think this is not a fad, but rather “the new normal.”

Things I learned over the weekend.

+ Lithium cell batteries at Radio Shack are far more expensive than buying them on line, e.g. from Batteries.com.

+ Chainsaws are not for you and me. I’m collecting a list of friends who had their chainsaw adventures. The chainsaw always wins. One friend is now a paraplegic. One was ouf of commission for six months with back, shoulder and tendon problems. My feeling is simple: If God planted the trees, He can knock them down. He doesn’t need my help.

+ Email is a stupid sales tool. It’s for closing, not for pitching. To pitch, there are only two tools: the phone and face-to-face. The height of idiocy is to email Harry an outrageous proposal for an
outrageous amount of money and expect him to say, “Do it.” Whatever happened to salesmanship? Emailing is not selling.

+ Open a folder on your PC called “Identification.” Scan into it your family’s birth certificates. passports, drivers and marriage licenses. My son is getting married in two weeks. The state of Vermont
wants his birth certificate to legitimize the blessed event. We can’t find his birth certificate. We suspect he doesn’t exist.

Michael Newton, when he was cute.

+ Interest rates continue to drop. Yuch. My Deutsche Bank NOW (pseudo-money market) account used to pay a grand 0.60% a year. Now — without any fanfare (and certainly without a phone call to Harry)  it pays 0.40%. Whoopee. I bet this anti-saver bias out of Washington is causing many idiots to gamble their savings, or borrow at today’s ultra-low mortgage rates.

Sick, black marriage humor.

A couple is lying in bed. The man says, “I am going to make you the happiest woman in the world”

The woman says, “I’ll miss you…”
_______________________

“It’s just too hot to wear clothes today,” Jack says as he stepped out of the shower, “Honey, what would the neighbors think if I mowed the lawn like this?”

“That I married you for your money,” she replied.
_______________________

He said – Since I first laid eyes on you, I have wanted to make love to you really badly.

She said – “Well, you finally succeeded.”

Harry Newton,who still can’t beat Skip at tennis.