In Search of the Perfect Investment

I post a new column once a day at 9:00 AM.

This is the column’s heart — Stocks I like. See the right hand column. All the stocks are doing pretty well. Note the nice pop yesterday in ICO — 30.83%.

I don’t discuss every stock every day. Sometimes I add stocks. Sometimes I remove them. Last night I removed GORO. Recently since its CFO left unexpectedly. I also removed GG. I’m not thrilled with how it’s been performing.

My money manager friends are conflicted. They reckon there’s a 50% chance the stockmarket will go up from here, and a 50% chance it will go down from here. They say there are no clear signs one way, or the other. This bothers them. As a result many of them are heavily in cash, awaiting a sign or two. Personally I’m bullish, though I am aware of the old adage, “Sell in May, and go away.” Return in October.

My friends worry about the gas pump, stubborn unemployment, Washington’s inability to fix the budget and a possible China slowdown. They are all askance about China’s economic statistics. Is 9% really 9%, or is it really 5%? If China slows, all those American companies exporting to it will suffer, since right now, China is the engine behind the world’s growth.

The upcoming period is clearly one for tightening stops. If your favorite stocks turn down, check why and be prepared to dump.

I mull on the upcoming direction and read. This piece by my favorite James Surowiecki of the New Yorker caught my eye. He comes down on the positive side:

Pumped Up?
The U.S. economy has finally started to create jobs at a reasonable clip. Inflation is still low. Corporate profits are healthy, and surveys of business conditions suggest that the recovery is, as the Federal Reserve recently put it, “on a firmer footing.” So are happy days here again? Hardly. Last month, consumer confidence plunged, and pundits are still talking about the possibility of a double-dip recession. Some of this can probably be put down to the general atmosphere of geopolitical turmoil-the threat of nuclear catastrophe in Japan, continued debt problems in Europe, political upheaval in the Middle East. But, economically speaking, the source of the anxiety is something much more specific: high prices at the gas pump. The price of oil has risen thirty dollars a barrel since February and more than forty per cent since last summer, and the fear is that expensive oil may bring stagflation, as it did during the oil crises of 1973 and 1979, or even put the economy back into reverse.

High oil prices are generally bad for the U.S.-oil spending goes largely to foreign producers, leaving less money for American goods and services-but if you look just at the dollars involved the terror they inspire is somewhat mysterious. Gas is a relatively small percentage of most household budgets, and prices are now about eighty-five cents a gallon higher than they were twelve months ago, which translates into a few hundred dollars more a year. That’s not trivial, particularly for lower-income Americans, but it’s not devastating. In fact, it’s less than the increase in income that most Americans will get this year as a result of the new payroll-tax cut.

Still, few things loom as large in the public imagination as gas prices, which have an unusual, and much studied, ability to make people feel poorer. Last month’s drop in consumer confidence was attributed almost entirely to the spike in gas prices, in line with a 2007 study, by the economists Paul Edelstein and Lutz Kilian, showing that spikes in oil prices have often depressed public sentiment in the past. And Carol Graham and Soumya Chattopadhyay, of the Brookings Institution, have shown that rising gas prices can have a significant impact on Americans’ level of happiness. In part, this is because most people, at least in the short run, have no choice but to fill their tanks. Gas prices are also literally the most visible prices we have; you can’t take a drive without seeing huge signs reminding you how much gas costs. Dan Ariely, a behavioral economist at Duke, has even argued that the way we buy gasoline-standing at the pump and watching the dollars pile up-is inherently disheartening.

The result of all this, as Edelstein and Kilian have documented, is that the impact of past oil shocks on the economy has been bigger than the numbers alone would suggest. James Hamilton, an economist at U.C.-San Diego, estimates that an increase in oil prices of twenty dollars a barrel should translate into a mere half-per-cent decline in G.D.P. But, if the kind of amplifying effect we’ve seen in the past kicks in, the decline could be much bigger than that.

Still, it’s not time to panic. This spike in prices, while annoying, is smaller and less likely to last than previous spikes. More important, the American economy is better prepared to deal with it. The oil shock of 2008 pushed Americans to buy fewer S.U.V.s and trucks, and more fuel-efficient vehicles, and the cash-for-clunkers program took hundreds of thousands of gas guzzlers off the road. On top of this, the downsizing of American car companies leaves them less exposed to drops in demand than they once were. Previously, falling sales of S.U.V.s and trucks forced American automakers to lay off tens of thousands of workers, further punishing the economy. Now G.M. and Ford are already employing fewer people and making fewer big vehicles, so any drop-off in demand will be less damaging.

What’s more, not all gas-price increases put a significant dent in growth; between 2002 and 2006, for instance, oil prices rose a hundred and fifty per cent, yet the economy continued to grow briskly. And not all price spikes are created equal; much research suggests, instead, that consumers become somewhat inured to higher oil prices, and really tighten their belts only when prices hit new multi-year highs. Given that we remember, all too well, paying more than four dollars a gallon in 2008, the recent price jump may be less disastrous. Hamilton has argued that only if prices get to be around a hundred and thirty dollars a barrel (they hit a hundred and ten last week) will we experience an oil shock like those in the past.

This doesn’t mean that there’s nothing to worry about. If the turmoil in the Middle East spreads to, say, Saudi Arabia, we’ll find out pretty quickly what an oil shock feels like. But, at the moment, the danger is more psychological than economic: fretting about gas prices contributes to a ubiquitous sense of uncertainty and instability, which leads to caution, which leads to reduced spending, and so on. The danger of self-fulfilling pessimism is important at a government level, too. If the Federal Reserve overreacts to higher oil prices and goes into full inflation-fighting mode-raising interest rates, as the European Central Bank did, foolishly, last week-it would risk slamming on the brakes just as the economy is finally getting into gear. So far, the turmoil in the Middle East has not yet provoked a true oil shock. Recognizing this fact may help us keep it that way. 

The column is from the New Yorker.

Mice love my car. I’ve already paid $250+ this Spring to get rid of them and the damage they have wrought. There are many solutions — none of which work 100%. My best:

+ Ring the car with baited mousetraps. Skippy smooth peanut butter works best.
+ Put mothballs under the car — but not inside it.
+ Put electronic noise makers close by.
+ Put sheets of Bounce inside the car and scattered around the engine (while it’s parked).

I don’t like boxes of poison, because they kill indiscriminately. But they probably work, sort of.

It must be computer buying season: All my my friends are asking what should they buy? In particular, should they buy an iPad2?  What about ditching all their laptops and just using a smartphone, like Verizon’s thunderbolt or Apple’s iPhone? Thoughts:

+ You can live your entire life with only a smartphone. Today’s Thunderbolt is much better than today’s iPhone. The Thunderbolt is much faster and does basically everything the iPhone does. It’s much easier to synch than the stupid BlackBerry. (My money manager friends believe BlackBerry’s maker, Research in Motion, remains a great short — though it has come down 20%.

+ The iPad is a smartphone with great book reading and Internet browsing skills. The bigger screen makes a huge difference. But it’s not a real computer.

+ A laptop is for serious work, like writing, doing spreadsheets, making PowerPoint presentations, trading stocks with complex programs like Fidelity’s Active Trader Pro. Apple’s laptops are wonderfully simple to use. Apple’s people will help you get them set up for free. I don’t like Apple machines for everyday business use for two main reasons: I don’t like Apple’s keyboard. It’s too slow. Second, I prefer laptops running Windows because my old, reliable software and gadgetry (like three external screens) run on it (Windows XP for now). Also  I understand the ins and outs of Windows. I use ThinkPad X201 laptops to write this column. The manufacturer, Lenovo, has updated the X201 to the X220, which has some nice improvements, including speed. I love two things about the X201 and the X220’s keyboard: First, the red pointing stick. It’s much faster than a mouse or a touchpad (which the X201 and the X220 also have). Second, the keyboards’ “feel.” They’re simply a pleasure to type on.

The best way to speed up your present laptop is NOT to buy a new machine, but to buy a solid state drive (SSD).  They’re not cheap. But, boy, does your machine fly with an SSD drive. For a big collection of SSDs, check out Newegg.

The power adapter problem solved. I was sick of schlepping a zillion of these to power every gadget I owned — from cellphones to iPads. Here’s the solution. The first is the iPad’s power supply. It will power everything from the iPad to the iPhone to Verizon’s Thunderbolt to virtually every cell phone out there. All you need are the approriate USB cables. I can get away with three — one for the iPad/iPhone, one for older BlackBerries and one for newer gadgets — like the Thunderbolt or the various MiFi hot spot devices. The reason I chose the iPad power supply versus the smaller iPhone one is that the smaller one doesn’t pack enough juice to power the iPad. You can buy this power supply from Apple for $30.

This gadget slips into your car’s cigarette lighter and, like the iPad power supply above, delivers sufficient juice to power everything. It’s available for $14.59 from Cyberguys.

Favorite recent New Yorker cartoons.

Harry Newton who marvels at the wonders of nature. This is Main Street, Chatham, New York, last weekend.

This is a closeup of the truly magnificent Bradford Pear tree, really called a Callery Pear (Pyrus calleryana).