In Search of the Perfect Investment

Help. I am going nuts. Crazy. Gaga. My brain can’t handle this. One day they say buy bonds. The next day they say sell your bonds and buy stocks. Latest from Bloomberg:

Marc Faber Says World Heading for `Major Inflection Point’

Investor Marc Faber said, “Instead of interest rates going down, they could start to go up, instead of the dollar being weak, it could strengthen.”

Global markets are heading for an “important turning point” as interest rates begin to rise within about three months and the U.S. dollar gains, according to investor Marc Faber.

Investors should buy stocks and sell cash and bonds because governments are continuing to print too much money and may create a new “credit bubble,” Faber, publisher of the Gloom, Boom & Doom report, told reporters during a forum in Seoul today.

“Instead of interest rates going down, they could start to go up, instead of the dollar being weak, it could strengthen,” Faber said. “I’m ultra-bearish on everything, but I believe you’ll be better off owning shares than government bonds.”

The Dollar Index slid 8.5 percent last quarter, the most since June 2002, and dropped 1.3 percent this month after Federal Reserve Chairman Ben S. Bernanke signaled he may add money to the economy. That new supply is reflected in exchange rates, based on how the currency reacted to the last round of so-called quantitative easing, said HSBC Holdings Plc, BNP Paribas SA and Nordea Bank AB. The central banks of Israel and Taiwan raised borrowing costs in the last 15 days.

Faber’s recommendation on stocks is shared by Warren Buffett, the billionaire chairman of Omaha, Nebraska-based Berkshire Hathaway Inc. Investors buying bonds now “are making a mistake,” he said Oct. 5 at Fortune magazine’s Most Powerful Women conference in Washington.

“It’s quite clear that stocks are cheaper than bonds,” Buffett said. “I can’t imagine anyone having bonds in their portfolio when they can own equities.”

U.S. stock dividends are paying more than government bonds. Ten-year Treasuries yield 5.2 percentage points less than equities of companies in the Standard & Poor’s 500 Index when adjusted for annual inflation, near the most since March 2009.

Faber told investors to abandon U.S. stocks a week before 1987’s so-called Black Monday crash and said in August 2007 that U.S. shares were entering a bear market. The S&P 500 peaked two months later before retreating as much as 57 percent.

My philosophy is conservative:  Bonds provide assured income, no matter their day to day “value.” Stocks are for gambling. They’re doing nicely at present. They’ll probably do nicely for a while. They could turn from one moment to another. The economy is not that splendiferous, although companies are earning more with fewer people. Meantime I’m keeping my stops tight.

The foreclosure/mortgage fraud scandal is the ultimate Cockroach.

His name is Egbert the Cockroach.

You know about cockroaches. You see one in your kitchen today. You will it. Three days later, his brother appears. You kill him. Four days later… you get the idea.

There are three reasons to sell stocks:

1. When the stock’s price has gone into overdrive. You’ve made several times your money. And now is the time to take some money home and to play with the bank’s money.

2. When the stock’s fundamentals turn seriously sour. Or the founder leaves.

3. When a cockroach appears. A cockroach event is something that doesn’t happen in the normal course of business. The classic cockroach is an “accounting irregularity.” The freeze on foreclosures is the biggest cockroach to come along in years. This one is going to be a dozey. Egbert has a huge family. We’re going to see more and more of them in coming weeks.

I wouldn’t go near the banks with a 12 foot pole. Maybe it’s time to short Bank of America (BAC) and Wells Fargo (WFC)?

Shingles revisited. Here’s what I’ve learned:

1. Shingles is a seriously awful disease. If you had chicken pox when you were young, you will get shingles when you’re old — i.e. over 50. Getting vaccinated with Merck’s Zostavax vaccine makes huge sense.

2. The vaccine is not easy to get because Merck makes it in batches. The next batch will be out in December. the previous batch was out in June.

3. Do not trust your doctor get a vaccine for you and the spouse. Call every doctor, pharmacy and hospital in your area until you find the vaccine now. And get vaccinated NOW. Do not wait. If you can’t find the vaccine, leave a Comment below.

Here’s a two page piece on what the CDC (Centers for Disease Control and Prevention) says about shingles. Click here. You can also Google “shingles” or “shingles vaccine” and find oodles of useful information. The reason you didn’t hear much about this is that Zostavax was only approved in 2006. The vaccine has been tight ever since. And most doctors forget to mention it to their patients. Which brings me to two additional points:

1. You are master of your own health. You need to read constantly.

2. Obsession is good. The squeaky wheel is even better. I may have located a couple of doses of the vaccine by pestering everyone and their uncle (including Merck). We’ll see this morning. I also would never had gotten all my locked Auction Rate Preferreds money back had I not made myself the ultra-squeakiest of wheels. I hate being a pain in the ass. Honey usually works better. But not always.

The Rabbi’s Sound Advice
A man goes to see his Rabbi. “Rabbi, something terrible is happening and I have to talk to you about it.”

The Rabbi asked, “What’s wrong?”

The man replied, “My wife is poisoning me.”

The Rabbi, very surprised by this, asks, “How can that be?”

The man then pleads, “I’m telling you, I’m certain she’s poisoning me, what should I do?”

The Rabbi then offers, “Tell you what. Let me talk to her, I’ll see what I can find out and I’ll let you know.”

A week later the Rabbi calls the man and says, “Well, I spoke to your wife. I spoke to her on the phone for three hours. You want my advice?”

The man anxiously says, “Yes.”

“Take the poison,” says the Rabbi.

Harry Newton who wonders why he gets more far email about shingles and bed bugs than he does about investing. Heh, guys we’ve made some nice money in the past couple of months. Look at AAPL, BHP, ECH, EWA and EWZ. Not shabby. Have you seen the Aussie dollar? Just about to hit par with the plummeting U.S. dollar. Amazing. A few years ago, you could buy an Aussie dollar for 55 U.S. cents.