In Search of the Perfect Investment

Panic is bad, say the pundits. To me, it can be good. Sometimes your gut says 15% is too big for a stop loss. I like the mentality of a day trader. See yesterday’s column.

The opposite of panic is obsession. You should always be obsessed with your new business ideas — especially those you can control. Events you can’t control — like the stockmarket — will drive you nuts. Obsession has made me money. Panic has taught me to severely limit my exposure to things I can’t control.

As I study the mess in Europe, I feel increasingly bullish on the U.S.

Think of it this way. Every country in Europe — except Germany — is in big trouble.  There’s now talk that the Euro  will plummet further, perhaps as low as $1.20. This is seen as a potential savior in Europe — a big boost for European exports. By summer, it may be a lot cheaper to be a tourist in Paris.

Fred Hickey’s stocks: “This is an unstable market,” Fred Hickey writes, “Individual investors, bloodied by two major crashes in the last decade, have been steadily exiting from stocks. For nine straight months last year they sold tens of billions of dollars out of stock mutual funds. The market is increasingly impacted by momentum traders and computer-driven trading. This generates great volatility. But volatility is a patient investor’s best friend. It creates opportunities to buy at wild lows and sell at wild highs.”

Hickey holds Rydex CurrencyShares Canadian Dollar Trust (FXC) — an anti-dollar hedge. He holds “a group of high-quality, short-term corporate bonds (Verizon, Disney, HP, Pepsi, Oracle and McDonalds). “Though I sharply cut back on my positions in tech stocks, I continue to hold the following tech stocks: Microsoft (MSFT), Verizon (VZ), Cadence Design Systems (CDNS), Novell (NOVL) and Sybase (SY).

Writes Hickey, “my biggest positions continue to be in the precious metals, primarily gold related. My single biggest gold position is still the SPDR Gold Shares ETF (GLD).” He has smaller positions in SGOL, SLV, and the new platinum ETF (PPLT).

He reports he still owns large positions in Newmont Mining (NEM), Agenico-Eagle Mines (AEM), Goldcorp (GG), Yamana Gold (AUY) and Golden Star Resources (GSS). He also owns GDXJ, which mirrors the NYSE Area Gold Miners Index. He also owns UXG which, he writes, “is a pure speculation for me.”

Gold is coming back. Remember a few months ago, the U.S. sold a bunch of the gold it had in vaults out west. This spooked foreign countries. But now the selling has apparently stopped.

Computer issues:

+ Windows has an ulimited appetite for malware — viruses, spyware, phishing tools, etc. You get the nasties when you open attachments or log onto unprotected networks, like those at airports. You can “protect” yourself with anti-virus software. But that software is not foolproof and lets nasties through.

In the last few days, my laptop was fast off-line, but painfully slow on line. (I complained yesterday.)  I ran Symantec AntiVirus several times. It said I was clean. Yet my laptop stayed slow. I had no more cleaning tools. I took a cloned hard drive from several weeks ago, swapped it in, updated my working files. Bingo I was fast again. It’s been a pleasure editing this morning.

In short, the only protection against the nasties on the Internet is a cloned hard drive and up-to-date backups of all your working files. Of course, the real protection is to buy a Mac. Apple computers, as yet, don’t have the nasty malware problems Windows do. More people are switching to them, which is why AAPL is up.

+ Beware of Windows 7. It eats memory, according to Computerworld. I suspect that, ultimtately, Windows 7 will prove itself — but it’s too early to embrace it.

+ PDF files can carry viruses. I just learned this. My contact at Computerworld magazine says don’t open PDF files unless you know from whom they came. Most importantly, keep your Adobe Reader updated.

+ MagicJack works, according Walt Mossberg. It’s a really cheap way of making oodles of long distance calls. Click here.

The Economist has a special report on Financial Risk. You should read it to see how dumb virtually all the world’s financial institutions were. I’ll write more about the Economist’s findings tomorrow. Meantime, feast your eyes on these two charts.

You can read the entire report at the Economist.

The old synagogue.
During a service at an old synagogue in Eastern Europe, when the Shema prayer was said, half the congregants stood up and half remained sitting. The half that was seated started yelling at those standing to sit down, and the ones standing yelled at the ones sitting to stand up. The rabbi, learned as he was in the Law and commentaries, didn’t know what to do. His congregation suggested that he consult a housebound 98 year old man who was one of the original founders of their temple. The rabbi hoped The elderly man would be able to tell him what the actual temple tradition was, so he went to the nursing home with a representative of each faction of the congregation.

The one whose followers stood during Shema said to the old man, “Is the tradition to stand during this prayer?”

The old man answered, “No, that is not the tradition.”

The one whose followers sat said,”Then the tradition is to sit during Shema!”

The old man answered, “No, that is not the tradition.”

Then the rabbi said to the old man, “But the congregants fight all the time, yelling at each other about whether they should sit or stand.”

The old man interrupted, exclaiming, “THAT is the tradition!”

Harry Newton, who is really happy to be back in the U.S. of A. He is looking forward to funding his dentist’s annuity today. His dentist will put his grandchildren through college with my  teeth.