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 2, 2007: Hedge
funds were originally set up because they could hedge their bets. This meant
they could sell shares short or buy put options, hence hedging against the time
when the market went south -- as it has done recently. Hedge funds contrast
with mutual funds, most of whom are prohibited from selling short or buying
early on figured that this hedging was worth paying bigtime for. And hedge funds
started charging bigtime -- today they typically charge 2% of assets under management
(called AUM) and 20% of all the profits made. The more money you have under
management as a hedge fund manager and the better you do, the richer you can
become. This has encouraged hedge fund managers to take risks, some very very
large. This outrageous risk-taking by some hedge funds has fundamentally changed
the nature of the hedge fund industry. Now, there are no "typical"
hedge funds. And investors who give their money to hedge funds (like me) have
to ask serious questions before parting with their hard-earned money. Questions
Do you borrow money? I personally don't think you should invest in a hedge fund
that borrows money. Borrowing increases the risks too much.
2. What do you invest in? Selling currencies short or buying calls on natural
gas is a very different hedge fund than one which buys Fortune 500 companies'
shares on the New York Stock Exchange.
What percentage do you have long? What percentage do you have short? What percentage
What's your philosophy on diversification -- the only "free lunch"
in the investment business? Will you put 90% of the fund's monies into a single
"bet" -- like the American dollar falling? Or natural gas rising?
The last few volatile
weeks have been "The Great Test" for hedge funds.
Some big name funds with big name backers have lost oodles and closed their
doors. Most hedge funds seem to have lost between 5% and 10% of their fund in
July. But not all. My favorite fund, Modern Capital Fund, was up 5.6% (net of
fees), while the S&P 500 index was down 3.1% and the Russell 2000 index
was down 6.8%. I asked manager, Dennis Mykytyn, how he did it. His modest answer:
"My longs went up and my shorts were down. Isn't that what I'm supposed
I asked for a
breakdown. Dennis said he was 60% long, 20% short, and 40% cash.
volatility. Or as they say in Australia, "up
and down faster than a whore's drawers." Look at this. Late yesterday
afternoon, something happened and it bounced up 150 points. How you predict
this? You clearly don't.
This morning, the Wall Street Journal wrote:
surge at the end of the session sparked speculation about the cause. Hypotheses
ranged from technical support, to buying on the lack of "sell" orders,
to pension-fund rebalancing, to erroneous trade orders.
seen anything like it," said Stephen Sachs, director of trading at Rydex
Investments. "It's truly amazing" the magnitude and suddenness of
such a rally off the lows of the day, right up to the highs.
long before this blows over?I asked my favorite ex-investment banker,
Harry: How long? Im guessing that this sub-prime contagion will
not spread widely. As the worlds savviest investment banker, youve
seen this happen before?
End of the year before it works its way through the system. The most
lasting effect will be on hedge funds and their ability to maintain their client
bases and to raise new money. Investors will start to quietly remove funds as
they reassess the risk and volatility.
your daughter to be more aggressive
About 10 years ago, a group of graduate students lodged a complaint with Linda
C. Babcock, a professor of economics at Carnegie Mellon University: All their
male counterparts in the university's PhD program were teaching courses on their
own, whereas the women were working only as teaching assistants.
When Babcock took the complaint to her boss, she learned there was a very simple
explanation: "The dean said each of the guys had come to him and said,
'I want to teach a course,' and none of the women had done that," she said.
"The female students had expected someone to send around an e-mail saying,
'Who wants to teach?'
may partially explain the persistent gender gap in salaries. In one early study
the volunteers were told they would be paid anywhere from $3 to $10 for their
time. After playing the game, each student was given $3 and asked if the sum
was okay? Eight times more men than women asked for more money.
soup: could help boost fertility.
From the last Saturday's U.K Telegraph newspaper:.
The lycopene in tomato soup can help boost fertility
A bowl of tomato
soup every day can help boost fertility among men, scientists claimed yesterday.
They have discovered that lycopene, which gives tomatoes their bright red colouring,
can turn sperm into super-sperm.
the University of Portsmouth studied the effect of lycopene in the diet on a
random group of six healthy men, with an average age of 42. The men were asked
to consume a 400g tin of Heinz cream of tomato soup every day for two weeks.
from the university's biomedical science department, said that during the two
weeks, levels of lycopene in the men's semen rose between seven and 12 per cent,
which was "significant".
They added that further studies should be carried out to discover whether the
same boost would be seen in infertile men.
Mugabe, thug. Hundreds of thousands are dying
in Zimbabwe because of this president/dictator/nutcase.
A friend, Todd Kingsley, visited Zimbabwe recently
on his way to safari in Botswana. His Zimbabwean driver would not talk when
anyone else was around. In private, he told Todd. "If anyone is overheard
talking politics, they disappear."
How crazy is Mugabe?
Plenty. He has his own blog, his own
"official home page." For an exercise in pure insanity you
MUST read it. Here's a sample:
in India. He went there this summer leading a group of American kids
to help the locals. They taught English, repaired a school and built a basketball
court, amongst other good things. For his India blog, click
here. The organization he went with was Putney
This is Michael
learning a useful skill -- finally!
He says "If the bowl is empty, I can walk pretty far -- maybe 100 meters.
If the bowl is full, I can make about two feet." Michael is 6' 4".
His beard is new.
used to cost thousands: Now they cost next to nothing. This ad comes
I spent a fortune on deodorants before I realized that people didn't
like me anyway. - Larry the Cable Guy
you thought Germany were great exporters. The
story: When in Europe recently, I found a tasty power bar. On my return to New
York, I wanted to buy some more. I couldn't find them on the Internet. So I
emailed the company. Three days later, some moron replied:
Dear Mr. Newton,
we are pleased
to hear that you are interested in our SCHNEEKOPPE Fruchtschnitte. However,
we have to inform you, that our products are not distributed in the USA. We
have given up exports to non-European countries to concentrate our activities
we do not deliver directly to end-consumer neither national, nor international,
nor do we sell via Internet.
We very much
regret not to be in the position to offer our products and hope on your understanding.
SCHNEEKOPPE GmbH & Co. KG . Postfach 11 53 . 21206 Seevetal . Deutschland
If you're an importer,
please import these excellent power bars and sell me some for my tennis bag.
The pregnant 59-year old woman
A woman went to a clinic, where she was seen by a young, new doctor.
After about three minutes in the examination room, the doctor told her she was
She burst out,
screaming as she ran down the hall.
An older doctor
stopped her and asked what the problem was, and she told him what happened.
he had her sit down and relax in another room.
The doctor marched
down the hallway to the back where the first doctor was and demanded, "What's
the matter with you? Mrs. Terry is 59 years old, has four grown children and
seven grandchildren, and you told her she was pregnant?"
The young doctor
continued to write on his clipboard, and without looking up, asked, "Does
she still have the hiccups?"
Rubber Gloves Are Made
noticed that his next patient, a little old lady, was extremely nervous. So
he decided to tell her a little joke as he put on his gloves.
"Do you know
how they make these gloves?" he asked.
"No, I don't," she replied.
he spoofed, "there's a building in Mexico with a big tank of latex and
workers of all hand sizes walk up to the tank, dip in their hands, let them
dry, then peel off the gloves and throw them into boxes of the right size."
She didn't crack
I tried," he thought.
But five minutes
later, during a delicate portion of the procedure, she burst out laughing.........
funny?" he asked.
"I was just
thinking how condoms are made!"
Gotta watch those
little old ladies! Their minds are always working.
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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