Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
9:00 AM EST, Friday, December 14, 2007: As
second mortgage money has dried up, there has been an increase in consumer credit,
i.e. money to people whose house credit is tapped out. This is worsening the
quality of credit card debt, much of which will undoubtedly default. Capital
One is the country's largest credit card issuer. It's already fallen dramatically.
This week CEO
Richard Fairbank said a slowing economy may cause bad debts to exceed the company's
forecast. Fairbank reiterated Capital One's prior estimate that failed loans
next year will range between $4.9 billion and "the mid-$5 billions.'' That
forecast may change if the economy worsens more than expected,. ... "Things
can certainly get worse than we have encompassed in our range,' ...We are certainly,
like everyone else, very concerned about consumer credit.''
As I've been harping,
you don't want to own issuers of credit, like Capital One. Insurers are a different
story. See yesterday's
column. .... Capital One looks an interesting short.
My favorite financial
author James Surowiecki has a piece in the December 17 New Yorker called
"Paulson's Plan." He concludes:
You can read
his entire piece here.
its also an example of the limits of such intervention. Although the
plan will provide real relief for at least some homeowners, its more
like a Band-Aid than like the major surgery that some of the hype makes out.
Thats because at this point interest-rate resets are just a small part
of the mortgage-market problem. Postponing rate resets doesnt change
the fact that too many people spent far too much borrowed money on houses
with prices that were far too high, and that they are now stuck in homes that
they cant really afford and cant sell. Even with the interest-rate
freeze, foreclosures will keep rising. More important, problems in the credit
markets are no longer limited to subprime loans; rather, they involve a wholesale
reëvaluation of risk, fuelled by a deep sense of distrust in the way
the financial system rates and values assets like mortgages. For these problems,
theres only so much that even the government can do. In 1907, J. P.
Morgan was able to come to the rescue not just because he could get all the
people who mattered into one room but because he was facing a clear problem
with a clear solution. Those were the days.
latest book is
You can read it in one sitting. I did last night. It's pitched to investment
newbies. It has some useful recommendations.
His five bull
1. Aerospace and defense
3. Oil and oil service
4. Minerals and mining
His 20 stocks for the long term:
2. Goldman Sachs
4. XTO Energy
7. Inverness Medical Innovations
8. CVS Caremark
14. International Game Technology
16 Procter & Gamble
17. New York Stock Exchange
18. Union Pacific
20. Sears Holdings
His favorite aggressive
growth mutual funds
1. CGM Focus Fund (CGMFX)
2. Dreyfus Premier Strategic Value (DAGVX)
3. Bridgeway Aggressive Investor (BRAGX)
4. Rice Hell James Micro Cap Portfolio (RHJSX)
5. Legg Mason Partners Aggressive Growth (SHRAX)
His favorite growth mutual funds
1. Buffalo Small Cap (BUFSX)
2. FBR Small Cap (FBRVX)
His favorite value
1. Putnam Small Cap Value (PSLAX)
2. Heartland Value (HRTVX)
3. Berwyn (BERWX)
4. Muhlenkamp (MUHLX)
I can quibble.
But overall his recommendations are sound. Note: He doesn't recommend index
funds. More on that on Monday.
year tax planning: Do
+ Charity donations
+ Tax-loss harvesting. Sell losers. Buy look-alikes.
+ Give kids and grandkids money. You and spouse can give $24,000 a year to as
many recipients as you like without incurring gift tax.
+ Pay tuitiion, dental and medical expenses directly for family members and
+ Max out IRAs and 401(k)s.
Most importantly, get the kids and the grandkids into a mutual fund or an EFT.
beat me to my latest brilliance: I bought
Alan Greenspan's Age of Turbulence as a book. Its size is daunting. Then
I think I'll listen to it on my latest (and third iPod):
$160 for 4 gigs of memory. A bargain.
Plug into my ears, slip into my pocket and listen to Greenspan. I tried to buy
Greenspan on Audble.com. But those guys are idiots. They wanted far ($43+) more
for a download than I paid for the hardcover ($21). I then bought the CD version
from Amazon ($29.67). Wrong. The place to buy the audiobooks is -- drum roll
-- Apple's iTunes store, which you access through the iTunes software on your
PC or Mac. The numbers are still screwy, but the convenience is not. It's fantastic.
No loading of CD by CD then synching onto iPod. Huge time and aggravation savings.
I vote for
Our new house has lots of high-hat ceiling light fixtures. I replaced the incandescents
in the basement with these
Cost $2.49. They
give the same light as a 60 watt incandescent, but use only 13 watts of electricity.
They work fine in the ping pong room. But for upstairs, I bought some of these:
Cost $8.49. They give the same light as a 75 watt incandescent, but use only
15 watts of electricity. I ran some tests over the weekend. I replaced some,
then asked my wife and my builder to identify which were fluorescent and which
were standard incandescent? They couldn't. They all looked the same. This is
good news for the cheap at heart, like me. I buy my bulbs at Bulbs.com.
Other ways to
save energy: Insulate your attic and your basement. Ride your bike to work.
Buy a hyrid next time.
happened to the squirrels?
There were churches in a small Texas. town: The Presbyterian Church,
the Baptist Church , the Methodist Church , the Catholic Church and the Jewish
Synagogue. Each church was overrun with pesky squirrels.
One day, the Presbyterian
Church called a meeting to decide what to do about the squirrels. After much
prayer and consideration they determined that the squirrels were predestined
to be there and they shouldn't interfere with God's divine will..
In the baptist
church the squirrels had taken up habitation in the baptistery. The deacons
met and decided to put a cover on the baptistry to drown the squirrels in it.
The squirrels escaped somehow and there were twice as many there the next week.
Church got together and decided that they were not in a position to harm any
of God's creation. So, they humanely trapped the Squirrels and set them free
a few miles outside of town. Three days later, the squirrels were back.
The Catholic CHURCH
came up with the best solution. They baptized the squirrels and registered them
as members of the church. Now they only see them on Christmas and Easter.
Not much was heard
about from the Jewish Synagogue, They took one squirrel and had a short service
with him called circumcision. They haven't seen a squirrel since.
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
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