In Search of the Perfect Investment

Every black man in America fears an incident with police that causes him to fear for his life.

Many have had one.

Black mothers often instance bad engagements with police as their Number One Fear for their sons.

Here’s the second Mother Fear — being sent to prison. This is a truly frightening chart.

My white friend who was born and raised in rural America tells me classmates who were bullies tended to become policemen.

I watched the weekend riots. I felt sadness that my adopted country had come to this post on Facebook. Please read this post. It’s heart-breaking.

Lessons from the weekend

+ Don’t leave your car keys in the ignition. Your battery will flatten. Done that — now twice. Don’t Do Stupid, Harry.

+ The two best tools to carry in your car — 12 foot jumper cables and a long, strong tire removal tool. Much easier to use than the flimsy short thing they give you for fixing a flat.

+ GPS clocks are a great idea, but often a disaster when daylight savings time rolls around twice a year. Some simply don’t adjust automatically, as they’re meant to.

+ Our builder did a great job installing electric blinds. Now one is broken, I can’t figure out how to fix it without removing all the beautiful wooden molding.

+ Always check YouTube first. Some kind soul will have posted a video on how to do it. It will save you hours.

+ The first time you fix it takes an hour of fiddling. The second time takes five minutes.

+ Backups for your computer work are key. My main flash drive backup blew up over the weekend. I don’t know why. But apparently they do regularly. Read the reviews on Amazon. Fortunately I had other flash drive and SSD hard drive backups. I quickly made multiple backups. The cost of backups are minuscule compared to the cost of what you’re backing up. I also back up the cloud which I don’t trust.

+ In Zoom, move back from your laptop’s camera. You’ll have a great chance of being in focus. Buy this mike and plug it into your laptop’s audio port.

$40 on Amazon. Click here.

“We Broke the World.”

Thomas Friedman’s long piece in Sunday’s NYTimes contained:

+ “In August 1998,” recalled Business Insider, “Russia defaulted on its debt. Three days later, markets all over the world started sinking. Investors began pulling out left and right. Swap spreads were at unbelievable levels. Everything was plummeting. In one day, Long-Term lost $553 million, 15 percent of its capital. In one month it lost almost $2 billion.”

Hedge funds lose money all the time, default and go extinct. But LTCM was different.

The firm had leveraged its bets with so much capital from so many different big global banks – with no trading transparency, so none of its counterparties had a picture of LTCM’s total exposure – that if it were allowed to go bankrupt and default, it would have exacted huge losses on dozens of investments houses and banks on Wall Street and abroad.

More than $1 trillion was at risk. It took a $3.65 billion bailout package from the Federal Reserve to create herd immunity from LTCM for the Wall Street bulls.

The crisis was contained and the lesson was clear: Don’t let anyone make such big, and in some ways extreme, bets with such tremendous leverage in a global banking system where there is no transparency as to how much a single player has borrowed from many different sources. (Read this sentence again –HN).

+ A decade later, the lesson was forgotten, and we got the full financial disaster of 2008.

This time we were all in the casino. There were four main financial vehicles (that became financial pathogens) that interacted to create the global crisis of 2008. They were called subprime mortgages, adjustable rate mortgages (ARMs), commercial mortgage-backed securities (C.M.B.S.) and collateralized debt obligations (C.D.O.s).

Banks and less-regulated financial institutions engaged in extremely reckless subprime and adjustable rate mortgage lending, and then they and others bundled these mortgages into mortgage-backed securities. Meanwhile, rating agencies classified these bonds as much less risky than they really were.

The whole system depended on housing prices endlessly rising. When the housing bubble burst – and many homeowners could not pay their mortgages – the financial contagion infected huge numbers of global banks and insurance companies, not to mention millions of mom-and-pops.

+ In 2010, we tried to immunize the banking system against a repeat with the Dodd-Frank Wall Street Reform and Consumer Protection Act in America and with the Basel III new capital and liquidity standards adopted by banking systems around the world. But ever since then, and particularly under the Trump administration, financial services companies have been lobbying, often successfully, to weaken these buffers, threatening a new financial contagion down the road.

This one could be even more dangerous because computerized trading now makes up more than half of stock trading volume globally. These traders use algorithms and computer networks that process data at a thousandth or millionth of a second to buy and sell stocks, bonds or commodities.

Alas, there is no herd immunity to greed.

+ What we know for sure, though, is that some five months after this coronavirus jumped into a human in Wuhan, more than 100,000 Americans were dead and more than 40 million unemployed.

While the coronavirus arrived in the U.S. via both Europe and Asia, most Americans probably don’t realize just how easy it was for this pathogen to get here. From December through March, when the pandemic was launching, there were some 3,200 flights from China to major U.S. cities, according to a study by ABC News. Among those were 50 direct flights from Wuhan. From Wuhan! How many Americans had even heard of Wuhan?

The vastly expanded global network of planes, trains and ships, combined with far too few buffers of global cooperation and governance, combined with the fact that there are almost eight billion people on the planet today (compared with 1.8 billion when the 1918 flu pandemic hit), enabled this coronavirus to spread globally in the blink of an eye.

+ As I look back over the last 20 years, what all four of these global calamities have in common is that they are all “black elephants,” a term coined by the environmentalist Adam Sweidan. A black elephant is a cross between “a black swan” – an unlikely, unexpected event with enormous ramifications – and the “elephant in the room” – a looming disaster that is visible to everyone, yet no one wants to address.

For the full Friedman piece, click here.

Harry’s BIG Lesson 

There are always two sides — a Disaster and a Huge Buying Opportunity.

Given that the long trend of stock prices is up, the option to choose is Huge Buying Opportunity.

My son, Michael, is a genius. Here’s what he did recently.

So, there you have it. Michael achieved a higher return — 38% –than most hedge fund managers have ever earned in a single year, or two. (Or in some of their lifetimes.)

I asked him what he’d do today?

   Ha, well, it is easier to be a genius when you don’t have to move money around all the time.

   I don’t know where I would invest right now so I wouldn’t do so. Patience. I am watching though.

Michael is not a hedge fund manager. But he is smart. His mother saw to that.

Meantime, I keep nibbling away. I bought some CRM on Friday and LUV today. Did you  see ZS? Wow.

If you’re receiving this blog my email, you  might enjoy reading it on the Internet — www.InSearchOfThePerfectInvestment.com. 

The web retains my formatting. Email destroys it.

Time to play tennis. — Harry Newton