In Search of the Perfect Investment

I didn’t post for several days and the stockmarket booms. There’s an omen here!

I finally went to the doctor. I should have gone earlier.

I didn’t have a “cold” or allergies, which “Dr.” Newton (i.e. me) thought. I have acute bronchitis. I’m now on a Z-Pak of azithromycin, which is a common antibiotic and which, after four pills, is working.

My “friends” diagnosed my coughing and spluttering as “walking pneumonia” I urgently needed a chest x-ray.

However, the nurse said I didn’t have a fever — I was 97.7. And the doctor listened to my chest and said it was “clear.” No x-ray was necessary and no pneumonia. Good news.

I have what everyone else has — upper respiratory bronchitis. The “acute” part means it’s short-term, i.e. it will last fewer than six months. Medical terminology is bizarre. My infection is coming “from on high,” not from deep down.

In short, if you get sick, a cough up green stuff, your eyes hurt, your throat is scratchy and you have a headache, go visit Eisenhower Urgent Care in Rancho Mirage and get yourself a Z-Pak.

Go visit a doctor. They’re actually useful.

It’s been a crazy, but great week, for investing

One of my commercial real estate syndications sold a property for a jaw-dropping 65%-more-than-what-they-paid-for-it a scant three years ago. Much of my syndicated commercial and residential real estate now seems to be worth more than we paid for it — a function of “value creation” (painting the lobby or putting granite counter tops in the kitchen) and buyers willing to pay more because investment opportunities simply aren’t there. Overall my IRR was 30.61%. Which is far better than a slap in the belly with a cold fish.

Despite the recent bounce, stocks are still lower than a year ago. Here’s the market over the past year.

I’ve done nothing in the past week, except hang onto the little I had — some index funds, ALK, BSV, HA, HD, NKE, SGOL, T and VZ.

My big holding remains VZ, which I tend to buy more of every time it falls a little. It’s still yielding 4.2%. It’s done well over the past little while. This is it over the past year.

It was a hard week. The bronchitis was energy-draining. Not good for inspiration and for writing this blog.

At week’s end the IRS complained that I never filed a 2014 income tax return. That’s IRS-talk for “We lost your return. We need it again. But we can’t take it electronically. So print the whole thing over again and mail it to us.“

This has happened before. Many times. And worse, the IRS typically mails their request for a new filing from a different office that I mailed it to the first time.

I predict that several weeks from now, another office of the IRS will send a sweet letter asking if I’ve died, and if I haven’t, please send them a copy of my 2014 return — but not electronically.

The lesson is clear: Make at least three copies of your returns. Keep them in a box. Send one out every time they ask for a copy. The problem is that my returns are typically several hundred pages long — what with all the K1s.  The cost of postage to the IRS can put you into the poor house. Maybe that’s a new tax? They own the Post Office, too?

Things are worth what you pay for them? We bought a Mercedes from the local dealer nearly a year ago.

It now needs a standard B-1 service — a glorified oil change. The local service guy wants $144. The Mercedes dealer wants $750.That’s 5.21 times.

The Mercedes guy will lend us a loaner for the five to six hours, their B-1 service will take.

The local service guy, staffed by ex-Mercedes technicians, says “Your B-1 service will take an hour. You can wait.”

There’s more to this. My friend tells me of the $14,000 trade-in his local Mercedes dealer offered. Several weeks later, his car was in an accident and got totaled. His insurance company sent him a check for $34,000!

More stuff I learned:

+ Everyone and their uncle is falling and hurting their ankle. The problem is usually the last stair, going down. I’ve nagged on this before. Pay attention. You fall. You can be out of commission for months.

+ Harvard earned a 7.5% annual return for the ten years to June 30, 2015. Their best year was FY07 with 23%. Their worst year was minus 27.3% n FY09.

+ Our war in Afghanistan is now in its 15th year. Congress has appropriated almost $800 billion for military operations. $113 billion has gone to reconstruction — more than was spent on the Marshall Plan to rebuild post-war Europe.

+ Why Donald Trump Is Wrong About Manufacturing Jobs and China. Click here.

+ John Oliver explains encryption clearly and with humor. Click here.

+ Gretchen Morgenson found one Wall Street stock analyst with a major conflict of interest. He’s pushing the stock of the company he just worked at and has oodles of shares in. For the gruesome story headlined “When an Analyst Has a Stake in the Stock He Picks, click here.

+ My father stuck a lot of his savings in Mexico at a mouth-watering 13% annual interest. A few years later Mexico devalued…. Turns out that chasing the high yield of “emerging” countries is a seriously bad idea. They don’t have the rule of law and they tend to have oodles of corruption — especially as their leaders stay longer and longer in power. Bloomberg just ran a piece “Turns Out a ‘Lie’ Lurked Beneath the Bookends of the BRICS.” The piece contained:

They were the darlings of the Davos set, the bookends of the BRICS. Simultaneous booms raised millions out of poverty and generated billions for a lucky few.

But now, Brazil and South Africa are united by political scandals and economic misfortune. Gloom has descended as the presidents of each country fight off corruption allegations that threaten to end their political careers. For the leaders, Dilma Rousseff and Jacob Zuma, it’s a stunning fall from grace, a humiliation made worse by markets rallying on the prospects of their demise.

“What many thought would be locomotives of growth have become risks,” said Mario Blejer, Argentina’s former central bank governor and a vice-chairman at Banco Hipotecario SA. “They gave the appearance that lots of progress was taking place. Suddenly we saw it was really just a lie.”

Their rise always had an aspect of illusion. Their emergence was launched as part of an investment thesis promoted by Goldman Sachs Group Inc. In 2001, the firm’s Jim O’Neill christened the BRIC countries, Brazil, Russia, India and China, as the engines of global growth; they were later joined by South Africa to become the BRICS.

The challenge now is whether South Africa and Brazil — which only became fully fledged democracies over the past 30 years — can prove they have the ability to clean house as their economies sputter. Failure to do so threatens to undo the gains of the past decade and send markets into a tailspin. It could also fuel social unrest.

“These events tend to further dissociate governing elites from the wider populations – even more so when administrations campaigned under socially progressive agendas,”  said Philippe Dauba-Pantanacce, an emerging-market economist at Standard Chartered Plc in London. “They weaken the social contract between the state and the people.”

Both nations have been battered by the global slump in commodity prices. In Brazil, that’s led to the longest and deepest recession in at least a century. In Africa’s most-industrialized country, the government has struggled to keep the lights on, cutting into growth — a key concern of credit-rating companies, such as Standard & Poor’s, as they threaten to downgrade debt to junk.

Meantime, Rousseff is facing massive protests and an implacable judicial system in a sprawling investigation into wrongdoing at the state oil company. For Zuma, the ruling African National Congress is questioning undue influence among wealthy friends.

“Now that they’ve been hurt badly by the commodity bust, their weaknesses become more clearly revealed,” said Alfredo Saad Filho, a professor of political economy at SOAS University of London. “All the limitations, contradictions, and lack of governance problems emerge.”

Their heydey with investors has long passed. Goldman Sachs closed its BRIC fund last year after it lost 88 percent of its assets since the 2010 peak. South African bonds are the worst performers across emerging markets over the past six months, with the yield on 10-year notes rising to 9.18 percent. Brazil’s real is down 12 percent in the past year despite a rally this year fueled by traders’ optimism that Rousseff will soon be gone.

For the full Bloomberg piece, click here.

Fun (though stupid) comments on The Donald:

Donald had the umbrella. Christie got wet!

Commentary on life

Harry Newton, who’s pleased to be back.