Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Thursday, August 4, 2005: Not
a brilliant idea to tour real estate in 103 degree heat. The brain fries. The
good news: The U.S. office market is coming back to life. The national vacancy
rate for all classes of space registered 15.6% at the end of June, down from
16.4% in the previous quarter and the steepest quarterly decline in five years.
Office rents are inching up.
bad news: Some cities are better than others. I was in White Plains and Westchester
County yesterday. Lots of old Fortune 500 headquarters being recyled into general
office space. Happening slowly.
Suffice, real estate is a local market. Local knowledge is key. Am cogitating.
this summer's reporting season boomlet continues. Whole Foods is almost $140.
And TriPath Imaging is up a buck this morning. Mother.
How Wall Street screws its clients: Today,
Wall Street can't make money buying and selling shares for its clients. Brokerage
rates are far too low. In any normal business, given the drastic drop in prices,
half the companies would have closed up shop and gone into plastics or biotech.
Not Wall Street. It simply trades ahead and around its clients, thus getting
its pound of flesh anyway. It can do this because Wall Street, despite the proliferation
of compliance officers, has basically no rules.
The BIG question: When you and I place an order to buy 100 shares (whether online
or through a broker), where do our 100 shares come from? And what price? I defy
anyone to give me a simple answer. Now read today's Wall Street Journal
story. Notice how few specifics there are -- like firms, dollars, timing, frequency,
etc. And ask yourself, how can the New York Stock Exchange "regulators"
censure the people who pay the regulators' salaries. It defies logic.
The New York
Stock Exchange's regulatory unit is considering enforcement actions against
brokerage firms that may have harmed investors by trading on knowledge of
their plans to buy and sell stock.
in the process of evaluating" some trades that raise questions about
whether Wall Street firms used their knowledge of certain types of orders
to make money at the expense of their customers, said Robert Marchman, executive
vice president of market surveillance at the NYSE. He declined to name the
firms, but said that some trades were "under review" for referral
to the exchange's enforcement division. The exchange has looked at trading
practices at more than 10 large Wall Street firms.
scrutiny comes as some Wall Street firms generate more profits from proprietary
trading. The NYSE also took the unusual step of reminding brokerage firms
in a letter Monday of their obligations to disclose their practices and protect
customer interests when trading stocks that customers also want to buy or
The letter lays
out the firms' duties when handling increasingly popular Volume Weighted Average
Price, or VWAP trades, in which mutual funds and other investors place orders
to buy or sell shares over a specified period for a price pegged to the average,
as well as situations in which a brokerage firm submits a so-called blind
bid in response to a customer's request, without knowing all the details of
The NYSE letter
is intended to express the exchange's concerns before the issue becomes "a
major problem for the investing public," Mr. Marchman said. The National
Association of Securities Dealers and the Securities and Exchange Commission
are also looking at these types of trades. Lawyers at Wall Street firms have
been requesting guidance on when it is acceptable to trade, said Stephen Luparello,
the NASD's executive vice president for market regulation.
The NYSE review
began in March 2004 after the United Kingdom's Financial Services Authority
fined Deutsche Bank AG's Morgan Grenfell securities unit for conducting trades
that the FSA found had harmed a client by pushing the price of a stock up
before the client could execute its order to buy. The client had requested
a blind bid, and Morgan Grenfell was able to figure out some of the securities
that were involved.
said in December that it "takes its obligations to its customers very
seriously and therefore regrets the misunderstanding with an experienced institutional
Some Wall Street
firms point out that trading in front of client program orders can be a legitimate
form of hedging. In one example, if a brokerage firm knows it is going to
sell a large block of stock to a fund manager at the end of the trading day,
it makes sense that the brokerage firm would buy shares for its own inventory
to have enough shares to sell to the client.
The tricky part
is that buying in anticipation of a customer trade can push the price up,
something that the NYSE says should be disclosed to investors. Some firms
such as UBS AG say they don't trade in front of blind bids, in which clients
may tip their hand about their intentions. Others such as Goldman Sachs Group
Inc. and Deutsche Bank have said that they may trade on such information,
but the practice helps them offer customers better trading prices.
A Goldman spokesman
said yesterday that the firm won't trade in such a way if a client instructs
it not to. He added that the recommended approach in the NYSE letter "largely
reflects our practices."
firms such as Barclays Global Investors have warned brokers not to trade on
information they provide about their plans. The NYSE's letter was "sorely
needed," said Michael Sobel, head of U.S. stock trading at Barclays Global.
It reminds a brokerage firm that it has "an obligation to put customer
interests ahead of its own pecuniary considerations."
have grown in popularity because they allow fund managers to buy or sell at
prices that look reasonable, at least on average. Investors who place such
orders, however, run the risk that the Wall Street firms will have minutes
or hours to trade in a way that pushes the average price around to their detriment.
confirm the attached document! I receive
those words several times a day. I'm guessing you do, too. Please don't open
the attachment. In fact, don't open attachments from people you don't know.
Genghis Kahn and the mosque: An amazing
man and an amazing book. Genghis Kahn conquered more than twice as much total
area as any other man in the history of the world. The Mongols make no technological
breakthroughs, founded no new religions, wrote few books, gave the world no
new crops. The only permanent structures Genghis Khan erected were bridges.
He spanned hundreds of streams and rivers in order to make the movement of his
armies and goods quicker. The Mongols deliberately opened the world to a new
commerce not only in goods, but also in ideas and knowledge. In nearly every
country touched by the Mongols, the initial destruction and shock of conquest
by an unknown and barbaric tribe yielded quickly to an unprecedented rise in
cultural communication, expanded trade and improved civilization. As he smashed
the feudal system of aristocratic privilege and birth, he built a new system
based on individual merit, loyalty and achievement. He took the disjointed and
languorous trading towns along the Silk Route and organized them into history's
largest free-trade zone. He lowered taxes for everyone, and abolished them altogether
for doctors, teachers, priests and educational institutions. He established
a regular census and created the first international postal system. At a time
when most rulers considered themselves above the law, Genghis Khan insisted
on laws holding rulers as equally accountable as the lowest herder. He granted
religious freedom within his realms. He insisted on the rule of law and abolished
The book is:
My favorite quote: "Upon reaching the center of Bukhara, Genghis Kahn rose
up to a large mosque and asked if, since it was the largest building in the
city, it was the home of the sultan. When informed that it was the house of
God, not the sultan, he said nothing. For the Mongols, the one God was the Eternal
Blue Sky that stretched from horizon to horizon in all four directions. God
presided over the whole earth; he could not be cooped up in a house of stone
like a prisoner or a caged animal nor, as the city people claimed could his
words be captured and confined inside the covers of a book."
TriPath Imaging has a conference call today at 11 AM:
But it's already reported great numbers, great guidance and the stock
is called up a buck. Mazel Tov, Harry. The call will be available by dialing
(888) 344-3716. International participants should call (706) 634-4926.
on a big Australian vacation:
Abe and Esther are flying to Australia for a two week vacation to
celebrate their 40th anniversary.
the public address system, the Captain announces, "Ladies and Gentlemen,
I am afraid I have some very bad news. Our engines have ceased functioning and
we will attempt an emergency landing. Luckily, I see an uncharted island below
us and we should be able to land on the beach. However, the odds are that we
will never be rescued and will have to live on the island for the rest of our
Thanks to the
skill of the flight crew, the plane lands safely on the island. An hour later
Abe turns to his wife and asks, "Esther, did we pay our charity pledge
check to Beth Shalom Synagogue yet?"
Abe, still shaken
from the crash landing, then asks, "Esther, did we pay our United Jewish
I'm sorry. I forgot to send the check," she says.
thing, Esther. Did you remember to send a check for the Synagogue Building Fund
this month," he asks?
me, Abie," begged Esther. "I didn't sent that one, either."
Abe grabs her
and gives her the biggest kiss in 40 years.
Esther pulls away
and asks him, " So, why did you kiss me?"
Abe answers, "They'll
+ Manhattan Pharmaceuticals: Click
+ NovaDel Biosciences appeals. Click
+ Hana Biosciences appeals. Click
+ All turned on by biotech. Click
+ Steve Jobs Commencement Address. The text is available:
Click here. The full audio is available. Click
+ The March of the Penguins, an exquisite movie. Click
+ When to sell your stocks. Click
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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will help pay Claire's law school tuition. Read more about Google AdSense,
here and here.