Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
9:00 AM EST, Tuesday, April 7, 2009.
causalities of this awful economy are threefold:
Diversification and alternative assets. The
theory that if you invested widely -- from commodities to biotech, from tech
to real estate, from private equity to hedge funds -- one downturn in one
area would not influence the other. Wrong. They all went down together.
Since I got back I've been reading financial reports about my broad array
of brilliant investments. They're all doing awfully -- including
those run by Citigroup, Goldman Sachs, Broadway Partners and other sundry
managers who profess competence.
Money managers. I'm disillusioned with them.
So, apparently, is everyone else. From the latest Economist.
There is now
fairly widespread dissatisfaction with the industry. The old wealth-management
universe is not just broken, its been broken and tossed away,
says Russ Prince of Prince & Associates, a market-research firm. Nobody
believes anything anybody is saying any more. A survey by his company
showed that 15% of the wealthy had left their main adviser last year and
a further 70% had pulled some of their money away.
A survey of
rich Americans by Harrison Group found that 63% had lost faith in financial
institutions. And Caroline Garnham of Lawrence Graham, a London law firm,
says that half of her clients do not use private wealth management at all,
and half of the remainder are dissatisfied with the advice they received.
Confidence that things will work out long-term. Everyone says we cannot
sustain our life style. See below.
is not one of my strengths. One day up, the next
day down. My best strategy remains "When in doubt, stay out. Cash
remains king." But the strategy is frustrating when you feel you're
a total idiot because you missed March's 20% rally. Will this rally continue?
And the answer is... Probably no. This piece from today's Bloomberg is fascinating:
April 7 (Bloomberg)
-- Marc Faber, the investor who recommended buying U.S. stocks before the
steepest rally in more than 70 years, said the Standard & Poors
500 Index may drop as much as 10 percent before resuming gains.
may decline to about 750 and rebound after July, Faber, 63, said in a Bloomberg
Television interview in Singapore. Global stock markets are unlikely to
fall below their October and November lows, he said.
some kind of correction, maybe around 5 to 10 percent, and after that we
can maybe rally more into July, said Faber, the publisher of the Gloom,
Boom & Doom report. The economic news, while it wont be
good, the rate of getting worse will slow down.
has rallied 25 percent from a 12-year low since March 9, when Faber advised
investors to buy U.S. stocks, saying government actions will boost shares.
Asian equities are among the best bets for global investors because they
are attractively valued and will benefit the most from a global economic
rebound, Faber said.
He told investors
to abandon U.S. stocks a week before 1987s 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
he bought some commodity producers in November and is now less interested
in these companies after some stocks more than doubled. He is also buying
some bank stocks and predicted that Citigroup Inc. shares could easily
rebound to around $5 from $2.72 currently.
rebound potential for some of these banks and financial institutions is
quite high, Faber said.
the billionaire hedge-fund manager who made money last year while most peers
suffered losses, is less optimistic, saying the banking system is seriously
underwater with banks on life support.
rally in U.S. stocks isnt the start of a bull market because the economy
is still contracting and theres a risk the U.S. falls into a depression,
Soros also said in a Bloomberg Television interview yesterday.
lowered its rating on U.S. equities to underweight from neutral,
saying the rally is set to end and the markets valuations are less
attractive, strategists led by London-based Robert Buckland said in a report
futures expiring in June were unchanged at 830.40 at 12:35 p.m. in Singapore.
In Asia, stocks
offer much better value than U.S. shares, and investors should
seize the opportunity to buy the regions equities on every setback,
Faber said. Japanese stocks also look interesting, he added.
buy Asian equities in the next three months, over the next five to 10 years,
for sure you will make money, he said. Asian exporting countries
will benefit the most from an expansion when it happens.
Faber is less
favorable on bonds, saying they are entering a long-term bear market
that can last for the next 15 years to 20 years.
should also diversify into the currencies of Canada, Australia and Singapore
because in the U.S. dollar may weaken somewhat, he added. The
dollar has strengthened against all of the so-called Group of 10 currencies
except the yen in the last 12 months, according to data tracked by Bloomberg.
advises investors to buy gold even though the precious metal is going to
be dead money in the next three to six months. He plans to buy
more gold if prices drop to between $750 and $800 an ounce, he added. Prices
retreated yesterday to $872.8, the lowest in more than two months.
Richard Russell of Dow Theory Letters would have done.
asked me what I'd do if I was running the country now? I answered, "I
wouldn't do a thing. I'd allow the bear market to run its course."
To my surprise, the crowd applauded wildly. Obviously, a lot of people disagree
with the current policy of bailing out everything that looks sick. I think
this is a policy that is going to fail, and it's a policy that's going to
strap the US with almost uncontrollable debt and interest on the debt for
years to come.
is: "Spend whatever it takes now, and as for the trillions of dollars
in new debt, let the politicians of tomorrow deal with the 'impossible debts'
and let our kids and grandkids pay with rising taxes."
two things I will say about the situation with certainty. The standard of
living in the US is sure to decline. And the international power of the
US will decline. To put it bluntly, the US will not be the undisputed leader
of the world, as it has been since World War II.
The US cannot
lead the world and at the same time be the world's biggest debtor. The marvelous
US life-style of recent decades depends on our creditors sending us their
goods and their savings (over $2 billion a day). This is unsustainable.
That which is unsustainable will end.
one likes the banks any longer. Meredith
Whitney and others have talked about toxic assets in recent days. But now
FASB changed the mark-to- market rule, banks ratios and earnings may look
-- temporarily -- better, as banks mark up the value of their lousy loans.
I don't make this stuff up. I don't even want to discuss it. I'm disgusted
stupid is the IRS? Another wasted hour, another
342 pages of printing, another visit to the Post Office for certified mail.
And the IRS gets yet another copy of my 2007 return. I'm not unique. Reader
Pat Long writes:
The IRS lost
one our returns, too.
Got the check,
but lost the return.
Had to resend
it at least six times over three years.
as well make extra copies now and have them ready for mailing, so when you
get the semi-annual notice you can just drop the return in the mail.
you could offer them carbon credits if they make the effort to find the
first one you sent.
travel ideas: Travel gets your mind off the
gloom. Travel today is cheap and easy. Upgrades are plentiful, too.
Burning Man. "Once a year, tens of thousands of participants gather
to create Black Rock City in Nevada's Black Rock Desert, dedicated to community,
art, self-expression, and self-reliance. They depart one week later, having
left no trace whatsoever." Click here.
Mont Blanc to the Mediterranean. From the Mountains to the Sea Across
Frances Most Beautiful National Parks. 14 days of hiking. Click
Grand Canyon rafting. "This is North America's ultimate river trip,
through one of the Seven Wonders of the World. What few people realize is
that because the water releases are controlled, the early and late-seasons
of April or September and October offer the Canyon at its best." This
is a trip Michael, my son, and I are taking in June. (It's probably the wrong
time, but it's his only time.) Click
does go on: As we were leaving early last
Saturday morning, I photographed our two Hummingbird babies for the last time.
They've grown enormously. Most fascinating: as they've grown, so their nest
has expanded. Wouldn't it be nice to have your house expand each time you
had a baby?
took this photo with my trusty Canon G10. It has manual focusing, which is
critical for closeups.
a Nice Lurefisk Yoke!
Ole goes into a store and asks the clerk for some "Lutefisk."
The clerk looked
at him and asked, "Are you Norwegian?"
offended and angry, says, "Well, yes I am. But, let me ask you something.
If I asked you for Italian Sausage, would you ask me if I was Italian? Or,
if I asked you for German Bratwurst, would you ask me if I was German? Or,
if I asked for a Kosher Hot Dog, would you ask me if I was Jewish? Or, if
I asked you for a Taco, would you ask me if I was Mexican? Would ya,huh? Would
The clerk says,
Ole continues, "if I asked you for some Irish Whiskey, would you ask
me if I was Irish? What about Canadian Bacon. Would you ask me if I was Canadian?"
I probably wouldn't," agrees the clerk.
and more angry, Ole says, "Well, all right then. Why did you ask me if
I'm Norwegian just because I asked for Lutefisk?"
The clerk replies,
"Because you're at Home Depot."
This column is about my personal search for the perfect
investment. I don't give investment advice. For that you have to be registered
with regulatory authorities, which I am not. I am a reporter and an investor.
I make my daily column -- Monday through Friday -- freely available for three
reasons: Writing is good for sorting things out in my brain. Second, the column
is research for a book I'm writing called "In Search of the Perfect
Investment." Third, I encourage my readers to send me their ideas,
concerns and experiences. That way we can all learn together. My email address
is . You can't
click on my email address. You have to re-type it . This protects me from
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look interesting. If you click on a link, Google may send me money. Please
note I'm not suggesting you do. That money, if there is any, may help pay
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here and here.