Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST, Thursday, August 16, 2007: To
be depressed? To be happy? To be neither? First, the great market sage and good
friend, Dan Good:
when it went up through 13000 and media gloom when it sank below.
Unless you were foolish enough to be on margin, how has your life really changed?
to be happy? Time to catch a falling knife. The concept is simple: Everything
is attractive at some price -- perhaps even these two?
Or are Goldman
and Lehman still both Cockroach Stocks -- with more bad news to come?
stocks should be sold instantly, if not sooner. Find one cockroach in
your new apartment. A day or two later, another will appear. Then another,
Stocks become like cockroaches when they report a piece of unusual news
-- like the SEC sending them a letter about something minor, like a delay
in filing their financials, like one or two of their hedge funds in trouble.
Enron, WorldCom, and all the great busts of recent years all began with
seemingly minor piece of semi-bad news. But, over time, more crawled out
of the wall and the stocks cratered. At one stage Enron, WorldCom were
among the most prestigious companies around.
Today's stockmarkets are Cockroach Markets. It started with sub-prime
(one cockroach) in the sub-prime lenders. Then we found the hedge funds
were infested. Now the problem is that our financial institutions are
having trouble pricing their assets... What next? Who knows? Cockroaches
come in many variieties, a few of which I've highlighted here.
brown cockroach is primarily tropical in distribution. In the United States,
this species is found mostly in the South, from Texas to Florida, but some
sightings have been made in northern states such as Pennsylvania and Ohio.
German cockroach, which has worldwide distribution, is by far the most important
and the most common cockroach. In addition to being a nuisance, it is associated
with outbreaks of illness, allergic reactions in many people, and transmission
of a variety of pathogenic organisms including at least one parasitic protozoan.
Australian cockroach (Periplaneta australasiae) can fly, though not far.
You can now find this aggressive fellow in the U.S. If you approach him
in a friendly manner, you can hear him say "G'day Mate!." The
U.S. Government has issued a Cockroach
Identification Chart, which will let you become more intimate with
your little house guests.
you think the market is going further down, the easiest way to make
money is to short the QQQQs or buy the QID, which is effectively ultra-short
puts on the QQQ. The QQQQ mirrors the movement of the Nasdaq 100.
When the Nasdaq goes down, the QID "ultra-short" goes up.
The DIA mirrors the Dow Jones Index.
And vice versa,
there's the DXD which is the Dow Jones Industrial ultra short.
The S&P 500
has the SPY. (also called the spider)
and the ultra
short index, the SDS.
big news are BIG dividend yields. As stock
prices have cratered, so dividend yields (on those paying dividends) have risen
dramatically. My present favorite is Penn West Energy Trust (PWE). It's now
sporting a 13% dividend yield. Energy stocks are out of fashion -- dah! (Most
stuff is out of fashion.) But energy prices are high. And this one is doing
all the right things -- expanding, drilling more, getting more efficient, etc.
Read their latest
quarterly report. Can PWE go lower? Yes. But, with a huge dividend yield,
it seems somewhat unlikely. The
Yesterday we wrote
about four commercial REITs. Reader Bill Brandenberger emails:
Of the yield
on CHC, approximately 75% of it is tax free. So that someone in a 35% tax
bracket would have a Taxable Equivalent yield of 17.32% (based on the yield
today of 12.23%).
Steve Pedian emailed:
Let me preface
my response by stating I have not analyzed the companies you mentioned in
today's column. The problem, as I see it with this whole group, is the difficulty
in valuing their balance sheets. Like the home builders, the finance
companies are starting to write down the value of their portfolios and there
is no end in sight and likely further decline in book value. There is a lack
of visibility in the mortgage market and significant liquidity pressure on
the group to maintain their cash position, the likely result (like TMA)
is not to pay a dividend or pay and further hurt their standing with creditors.
Further, the problems in the mortgage markets have moved beyond sub-prime
(remember TMA focused on high quality jumbos) and the issue now is liquidity,
purchasers of mortgage paper are no longer buying mortgage loans. Again, like
the home builders before them many of these companies are trading below book
value but I would caution your readers to not place too much faith on this
group maintaining its current book value. Remember, the homebuilders wrote
down their portfolios over several months and not just one write down. I would
recommend your readers focus their efforts on high quality companies with
healthy long term prospects. The recent uncertainty is starting to present
great buying opportunities.
Good advice Steve.
But this stuff is volatile. Look what happened to TMA yesterday. It bounced
back $2.95 or 39%.
to make some "offensive" bids? Every
bleak moment has its opportunity. My favorite about-to-be son-in-law writes
If no one can
get lending to buy and lots of people need to sell, there will probably be
chances to pick up prime residential real estate at 20c-30c on the dollar
if you can pay in cash. I think you should look into prime NYC residential
property and make offers the sellers will find offensive. Let them know that
youre there with cash if they change their minds. While NYC came to
mind because its close, places like San Diego, Las Vegas and Phoenix
are probably places you can get the really offensive bargains.
sense. But it could be early. My phone calls to Manhattan brokers yesterday
1. People are
still getting mortgages for apartments in New York, albeit much more expensively
than a month ago.
2. Demand may have dropped, with fewer buyers. But prices haven't dropped to
anywhere near "offensive" level. To wit, three years ago I bought
a two-bedroom apartment for $1.5 million. Now the identical one, one floor up,
is on sale and can be had for a "bargain" $1.8 million, down from
the $1.995 million asking price. I'd buy the thing for under $1 million. But
that won't happen, for now. Real estate is location. And Manhattan is still
expensive. It hasn't yet priced in the financial community's firings and/or
the paucity of 2007 Wall Street bonuses .
The new iMacs are getting rave reviews: The
Apple iMac is its latest desktop, cheaper than a laptop and much more powerful.
Walt Mossberg of the Wall Street Journal loves them. So does ComputerWorld
magazine. There are two "issues" to check out: First, the
screen. It's glossy, which means colors look brighter, but you get reflections.
So it's important where you place it. Second, the keyboard. You may not like
it. You can replace the keyboard with any corded keyboard. You can't replace
Apple's new iMac comes with new iPhoto and iMovie software, If you need a desktop,
this is the one to get. I don't think Apple itself has become "offensive,"
yet. At $100 it could become offensive. It's hard to catch a falling knife and
not get cut.
to become a dictator. Read this and be amazed
(or impressed). From The New York Times:
Aug. 14 President Hugo Chávez will unveil a project to change
the Constitution on Wednesday that is expected to allow him to be re-elected
indefinitely, a move that would enhance his authority to accelerate
a socialist-inspired transformation of Venezuelan society.
of term limits for Mr. Chávez, which is at the heart of the proposal,
is expected to be accompanied by measures circumscribing the authority of
elected governors and mayors, who would be prevented from staying in power
indefinitely, according to versions of the project leaked in recent weeks.
the communications minister, said Mr. Chávez would announce the project
before the National Assembly, where all 167 lawmakers support the president.
Supporters of Mr. Chávez, who was re-elected last year with some 60
percent of the vote, also control the Supreme Court, the entire federal
bureaucracy, public oil and infrastructure companies and every state
government but two.
The aim of the
overhaul is to guarantee to the people the largest amount of happiness
possible, Mr. Lara said at a news conference on Tuesday. ...
Since Mr. Chávezs
re-election to a third term in December, he has surprised many with the breadth
of the changes in his political and economic policies.
He has nationalized
telecommunications, electricity and oil companies; forged a single socialist
party for his followers; deepened alliances with countries like Cuba and Iran;
and sped the distribution of billions of dollars for local governing entities
called communal councils.
As Mr. Chávez,
53, settles into his ninth year in power, images of him have become impossible
to avoid here. On billboards, posters and murals, he is seen hugging children,
embracing old women, chanting slogans and plugging energy-saving Cuban light
bulbs into sockets.
that make major sense: Spinach, salmon, tomatoes, oatmeal and pomegranates.
logic. But logic nevertheless - 1
"Give me a sentence about a public servant," said a teacher.
The small boy wrote: "The fireman came down the ladder pregnant."
The teacher took the lad aside to correct him. "Don't you know what pregnant
means?" she asked.
"Sure," said the young boy confidently. "It means carrying a
Different logic. But logic nevertheless - 2
A nursery school teacher was delivering a station wagon full of kids
home one day when a fire truck zoomed past. Sitting in the front seat of the
truck was a Dalmatian dog.
The children started
discussing the dog's duties. "They use him to keep crowds back," said
"No," said another, "he's just for good luck."
A third child brought the argument to a close. "They use the dogs,"
she said firmly, "to find the fire hydrants."
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 .
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