Technology Investor 

Harry Newton's In Search of The Perfect Investment Newton's In Search Of The Perfect Investment. Technology Investor.

Previous Column
9:00 AM EST, Wednesday, December 19, 2007: We bought an office building in White Plans, New York on October 6, 2005 and. We fixed up the lobby, cleaned up a couple of vacant spaces, and finally rented them. We sold it on December 6, 2007. Total annual IRR for the investors (I was one) was 18.16%. There are no major lessons here, other than that properties with sound cash flow have value, can be financed and can still be sold. Banks have lost their appetite for risk. They remain shy on "iffy" projects. But they will finance sound projects.

The latest Forbes also recommends MBIA (MBI) and AMBAC (ABK). Click here. Both stocks seemed to have found their bottoms.

A digital photo frame is a great Christmas present: You have millions of digital photos of the family. What to do with them? Print them. Hang them on the walls. Make endless photo books. I like the idea of the digital photo frame. You can load it with literally thousands of photos and have them cycle by. My extensive researches into digital photo frames turned up:

1. You don't want one smaller 8".

2. Every one of the digital photo frames at our local Best Buy were just plain ugly. Most are.

3. I love the Philips 8" one. I;d bought my wife one, and recently my daughter.

But today Amazon says the frame is "currently not available." An alternative, Ziga 8-inch is also not avaiable. I don't know what to tell you. .

How much pain is out there? In a word: plenty: The numbers are staggering. Millions of people won't be able to pay their soon-to-be higher mortgages and will lose their houses to foreclosures. Housing problems are spreading to the businesses that sell things into house -- like furniture, etc. I've read the big-pictures statistics on the pain. But it made little impact on me emotionally until I read this piece in the New York Times on Monday:

Holidays Find Loan Crisis Spreading to Businesses and Neighbors

Some homeowners in the Bronx can’t afford furnishings as mortgages rise; one store owner said he didn’t know how much longer he could hang on.

Marcia is not in the holiday mood this year. She is not putting any Santas, reindeer or lights outside her house. She is probably not going to have many presents inside. There will be no home improvements anywhere. The fact is, she does not know how long she can even call the place hers.

A little more than a year since she bought her Bronx home for $535,000 with no cash down, she is facing foreclosure. Even if she could scrape together the $7,500 to catch up on her overdue mortgage payments, other calamities await: an interest rate that will rise in coming months and a huge balloon payment hovering in the distance like a financial Hindenburg.

“I’m not doing anything to fix up the house,” said Marcia, a nursing home aide who declined to give her last name during an interview at a community agency that offers counseling on preventing foreclosure. “I just work, eat, sleep and hope they don’t take my home. This is the worst Christmas I ever had.”

She is not alone in her stress and fears among the boxy brick houses that line the streets of her Williamsbridge neighborhood. The binge of subprime loans that flooded this area a few years ago has now given way to foreclosures and forced sales by homeowners saddled with onerous mortgages they could never repay. The effects of this free-for-all are increasingly felt even among those who did not take on risky loans. Longtime neighborhood residents worry that their property values will be sunk by the double whammy of poorly maintained homes and revolving-door neighbors, while shopkeepers on the nearby commercial strip on Boston Road — especially those who sell hardware or home furnishings — say business has plummeted by 50 percent or more, as strapped homeowners cut costs.

“Everybody’s scared,” said Khemraj Ramprasad, the owner of K & R Paint and Hardware. “People are not repairing their homes as much. They’re not painting. People are taking every penny they have and putting it into paying the mortgage.”

His sales have been off for much of the year, he said. Despite his store’s name, he has not restocked his paint inventory, since people are hardly buying any. Business has slacked off so much, he spends his days remodeling the store, building new wooden display shelves in hopes of generating more sales from those customers who do venture inside.

“This is affecting everybody,” he said. “Ask anybody around here: Business is very bad.”

Housing advocates have been too busy trying to deal with the ever-growing numbers of panicked homeowners to gauge the collateral damage from the lending crisis. But many of them are not surprised that it is beginning to take a toll on the larger community.

“On the street level, there are signs of deferred maintenance,” said Sarah Gerecke, the chief executive of Neighborhood Housing Services of New York City, a nonprofit group that counsels homeowners. “People can’t afford to fix screen doors, keep up their roof or yards. Neighborhoods that used to be spotless now show signs that owners can’t afford to keep up their homes.”

In some cases they cannot even work up the money to furnish their homes. Few customers have visited Boston Road Furniture, despite a handwritten come-on taped to the window that promises anyone can “Get Up to $3,000 Instantly No Job No Credit Check.”

Marcus St. Marie, the store’s owner, remembers when West Indian immigrants like him would flock to local stores.

“You come to this country, and what is the first thing you look for?” he asked. “A home. And then the furniture.”

Sales have been so bad since March, he said, that he has laid off four of his store’s five employees. He has no idea how much longer he can hang on.

“We need a government loan,” he said. “This country is falling apart. We need customers. We need some help. So many ‘For Sale’ signs in this neighborhood. People just have to leave their homes and run.”

About the only place that has a steady stream of clients is the local office of Neighborhood Housing Services, where Theresa Ortiz offers advice on how to prevent foreclosure or soften its blow. The calls begin pretty much when the office opens, and everyone pitches in, regardless of job title.

Her office sits amid a strip of storefronts, some recent casualties of the loan debacle. On one side is a shuttered furniture store. On the other is a vacant office topped by a sign advertising easy mortgages and houses with no money down.

This is not an easy time of year, as people trudge into Ms. Ortiz’s office carrying sheaves of financial documents. Sometimes the tears come before the words. Often, the story is the same: A friend from church or work suggested they refinance their home, or insisted they could help them buy their first home. Within a few years, they are facing Ms. Ortiz, frantic and frightened.

The luckiest ones are able to work out a deal with the lenders and save their homes. Others, she said, are lucky if they can sell their houses and retain what little equity they have left.

In the rush of cases in recent years, she has seen parents juggle two or three jobs in an attempt to keep their homes. One woman, she said, sent her 10-year-old son to live with relatives in Jamaica while she worked two jobs to stave off foreclosure.

“She did not want to leave him at home while she worked, because then child welfare would have stepped in,” Ms. Ortiz said. “This is interfering with the quality of people’s lives and the nuclear family. Who wants that kind of life in order to keep a roof over your head?”

Other housing advocates asking the same questions have begun to look toward Wall Street for part of the answer. They note how investment banks made tidy profits and bonuses in recent years by scooping up batches of subprime loans to back lucrative securities.

“They were telling lenders what kinds of loans to make,” said Kevin Connor, the author of a recent report on Wall Street’s role in the subprime crisis, sponsored by a coalition of housing advocacy groups. “They built this house of cards on the backs of homeowners.”

Despite the losses taken by investments banks in recent months, housing advocates say that banking executives will still get their bonuses this year, and even chief executives who lost their jobs because of the mortgage losses walked away with multimillion-dollar severance packages.

So some have proposed a new investment for Wall Street bonuses: an emergency fund that would help homeowners in distress. James Mumm, a housing advocate from the Bronx, said $10,000 could help one homeowner refinance to an affordable, fixed-rate mortgage.

“These guys made millions in bonuses, so they go off and buy Rolexes or real estate while people are being put out on the street,” said Mr. Mumm, who is the executive director of the Northwest Bronx Community and Clergy Coalition. “Now the homeowners are asking for their money back. This is about reparations.”

Despite the warnings and the horror stories — or even bitter personal experience — some homeowners find themselves still being courted by mortgage brokers eager to get them to refinance.

“You should see my answering machine,” said Israel Vazquez, a Police Department employee who has already refinanced his home once since he bought it two years ago. “All these mortgage companies are still leaving me messages. They all say they can get a deal for me. I don’t trust any of them.”

For good reason. When a financial squeeze forced him to refinance last year, he traded a $505,000 30-year fixed mortgage at 5.6 percent for two subprime loans totaling more than $600,000 with adjustable interest rates that will go up to 10 percent or more next year. He has not missed any payments, but the monthly installments he can afford to pay are so low that he now owes more than when he began.

Though he was a lifelong renter, his wife always dreamed of having a house. She died 11 years ago, of asthma.

“She died in my arms,” he said. “She was the best thing that ever happened to me. You know what, she was too good for me.”

Ms. Ortiz shushed him.

“Don’t ever say that,” she insisted.

His children, he said, persuaded him to buy the house, to honor his wife’s wishes.

“This is sinking me,” he admitted. “I just want to get it together.”

Why do I love this cartoon? My love for architects?

A touching Christmas story.
IMkele Mbembe was on Christmas holiday in Kenya. On a hike through the bush, he came across a young bull elephant standing with one leg raised in the air. The elephant seemed distressed, so Mbembe approached it very carefully. He got down on one knee and inspected the elephant's foot, and found a large piece of wood deeply embedded in it. As carefully and as gently as he could, Mbembe worked the wood out with his hunting knife, after which the elephant gingerly put down its foot. The elephant turned to face the man, and with a rather curious look on its face, stared at him for several tense moments.

Mbembe stood frozen, thinking of nothing else but being trampled. Eventually the elephant trumpeted loudly, turned, and walked away.

Mbembe never forgot that elephant or the events of that day. Twenty years later, Mbemb was walking through the Chicago Zoo with his teenaged son. As they approached the elephant enclosure, one of the creatures turned and walked over to near where Mbembe and his son Tapu were standing. The large bull elephant stared at Mbembe, lifted its front foot off the ground, then put it down. The elephant did that several times then trumpeted loudly, all the while staring at the man.

Remembering the encounter in 1986, Mbembe couldn't help wondering if this was the same elephant. Mbembe summoned up his courage, climbed over the railing and made his way into the enclosure. He walked right up to the elephant and stared back in wonder.

The elephant trumpeted again, wrapped its trunk around one of Mbembe's legs and slammed him against the railing, killing him instantly.

Probably wasn't the same elephant.

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 software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse, though some 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 Michael's business school tuition. Read more about Google AdSense, click here and here.

Go back.