Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Friday, February 2, 2007: Thinking
of taxes and returns. When I first sold my business, a money manager explained
how I would live the rest of my life paying few taxes. This interested me since
living in New York City means beyond ridiculous taxes. His idea: he'd invest
all my money in equities (i.e. the stockmarket). Every year, my portfolio would
grow by 10% (as if by magic and clockwork.) I'd sell enough of the gains
to pay my living expenses. Hence I wouldn't pay taxes on ordinary
income. That would cut my rate down from over 40% to under 27% -- 15% for the
Feds and 12% for New York State and City.
It didn't quite
work out that serendipitously. The stockmarket crashed, losing some of my principal
before I caught it, panicked, went to cash, re-grouped and learned the benefits
I'm now smarter.
It's absolutely critical to look at after-tax returns. For example, if
you earn 12% interest on something, that's really only 6.6% after taxes. Suddenly
a great 12% investment looks pretty awful (and risky). Now triple tax-free muni
bonds begin to look interesting.
Mull on this.
email from a reader. Good thinking:
Kudos on another
wonderful column today! As you Aussies say, it was Ace. .
were mentioned today in the column and I find that world interesting. I know
6 major hedge fund operators and, in my experience, they are emotionally detached
(semi-retired) and content with their past earnings. It seems
that the majority of HF executives rely on past performance and
are self-proclaimed demigods in financial circles. They made their money
during a Bull market when it was relatively easy to earn 40% for your investors
if you had a diverse portfolio of shorts, longs, private equity, and stock
de jours (day trading).
Now, with a volatile market on Wall St., an extremely competitive/deep Private
Equity market, and no real easy money to be made, the Hedge Fund
executives seem happy to let their analysts/traders run a fund that earns
2-8%, which translates to a 20% profit to the managing partners, and nets
the individual investor 0-2% after fees. I find it hard to see a compelling
reason to invest with Hedge Funds as a result. In the old days, they had leverage
to influence markets or companies and were able to provide economies
of scale in the capital markets. The only funds I would invest in are those
with active managing partners/executives who have personal scratch in the
game with a 10% minimum on total assets. Hence, they are financially/emotionally
invested and feel the pain of poor decisions (one of the only ways to keep
a greedy HF exec engaged). My take on the world of hedge funds in the 2007
With all of
that said, you are spot on when you encourage readers to STAY LIQUID. Im
running my money like a entrepreneurial business owner:
1. I keep cash on hand for any unforeseen short term issues
2. I look for opportunities that reward the ability to move quickly/earn instant
equity/take advantage of a fire sale/etc.
3. I Manage current investments under asset
4. I Wait for market corrections/or short term opportunities in certain markets:
residential real estate in Texas, Commercial Real Estate in NY, Northern California,
Dallas, mining stocks in Australia, etc. -- areas I know something about.
5. I Workout, enjoy life, be happy with what I have, tell my wife that I love
6. I plan to see Federer at Indian Wells in March and would love it if you
could make it out. Until we speak again!
friends are bubbling with new ventures: I'm
being bombarded with new startups to invest in. It's a heady time. The BIG motivators:
1. Outsourcing. You can run a $20 million company now with ten people. It's
2. The Internet. You sleep. Your Internet site brings you orders and money.
3. The public's changing tastes. They're changing faster. Don't believe? Go
into your local high-end supermarket (e.g. Whole Foods) and see what they're
selling in the way of bottled drinks. 99% didn't exist 3 years ago.
4. The wealth. I'm staggered at what people will spend large amount of money
on. Never underestimate what they'll pay. I suspect people believe it's worth
what they paid. People pay hundreds of dollars for jeans. For jeans!
My son, Michael, is 24. He's bubbling with entrepreneurial ideas -- most of
which seem fantastic. My due diligence doesn't keep up with his imagination.
Ask your kids what their friends do and spend money on. It's not your
father's world out there.
Take a deep breath: My friend calls in panic.
His Outlook is running SLOOOOW. His life is on Outlook. His life is ended.
yet. Three hours later he has a reprieve. First, the background:
1. PCs are not mainframe computers. They can do some things simultaneously --
but not MANY things. Load them up. They will eventually grind to a halt. Moderation
in all things computing is good.
The two biggest constraints are memory and hard disk. My friend has only one
gigabyte of RAM memory on his big desktop. I have three gigabytes on my baby
laptop. Memory makes a BIG difference and costs little. Get more.
3. Software that runs "in the background" slows your computer down.
As time passes, you tend to load more and more software onto your baby machine.
It seems great at the time. BUT much of your new software has a great idea:
It's faster for you if you pre-load the software, keep a little running all
the time -- so when you actually come to start the software, it loads fast and
runs fast. Good idea. Except when everybody has the same idea.
For an inkling of the work you're making your baby computer do, look down on
the bottom right hand side of your screen. See all those little funny icons
on what Microsoft calls your task bar. They're all the software your computer
is running. You don't need to burden your baby computer for 90% of those icons,
because you're not using 90% of them all time. You need to remove these icons.
Go to Run and run MSCONFIG. Go to the Startup tab and uncheck all the software
you clearly don't need running -- Start with all the Apple, iTunes, QuickTime,
Adobe and RealPlayer stuff. Note you're not deleting it. All you're doing is
stopping it loading next time you start your overburdened PC.
Outlook: Understand it's a poorly-designed baby program, created as an afterthought
by Microsoft who needed something new in a new version of Office a long time
ago. Microsoft, in its wildest and wettest dreams, never anticipated Outlook's
success. It's designed badly. The more stuff you leave in Outlook, the slower
it will run -- until one day it will die. Keys:
Delete what you can.
2. Save elsewhere what you need. Don't leave multi-megabyte files in Outlook.
Save them to your hard disk. Get them out of Outlook.
3. Archive all your Sent items and your old Inbox items. You'll still be able
to find them when you need them. But you won't load them every time you start
4. Scanpst.exe is hidden on your hard disk. It's also called the Inbox Repair
Tool. You need to run it against Outlook.pst -- the file containing all your
Outlook stuff. By now, your Outlook database is riddled with errors. Time to
5. Then it's time to Compact your Outlook.pst file. Here's how: Right click
on Personal Folders. Left click on Properties. Click on Advanced. Hit Compact.
Go have dinner.
need to do all this several times because your Outlook stuff is a total mess
-- trust me. Figure two to three hours. It will start speeding up.
you're diligent, you'll Delete, Archive, Repair and Compact regularly -- like
once a week.
you don't understand all this, send me an email. I have something written out
in more detail.
at the land Down Under:
Australia's federal government will show another surplus for its financial year
to June 30, 2007, the government has just reported. It will be smaller than
forecast. The reasons: lower receipts from taxation as a result of recent tax
cuts and higher payments on education grants. It's nice to see a government
lawyer story, part 12:
A Mafia Godfather finds out that his bookkeeper has cheated him out
of ten million bucks. His bookkeeper is deaf. That was the reason he got the
job in the first place. It was assumed that a deaf bookkeeper would not hear
anything that he might have to testify about in court.
When the Godfather
goes to confront the bookkeeper about his missing $10 million, he brings along
his attorney, who knows sign language.
tells the lawyer "Ask him where the 10 million bucks he embezzled from
using sign language, asks the bookkeeper.
signs back: "I don't know what you are talking about."
The attorney tells
he doesn't know what you're talking about."
pulls out a pistol, puts it to the bookkeeper's temple and says, "Ask him
The attorney signs
to the bookkeeper: "He'll kill you if you don't tell him!"
signs back: "OK! You win! The money is in a brown briefcase, buried behind
the shed in my cousin Enzo's backyard in Queens!"
asks the attorney: "Well, what'd he say?"
The attorney replies:
"He says you don't have the balls to pull the trigger."
logic, part 4:
Two guys were discussing popular family trends on sex, marriage,
and values. Stu said, "I didn't sleep with my wife before we got married,
Leroy replied, "I'm not sure. What was her maiden name?"
brains come from:
A little boy went up to his father and asked: "Dad, where did all of my
intelligence come from?" The father replied. "Well, son, you must
have got it from your mother, cause I still have mine"
The medical diagnosis:
A doctor examined a woman, took the husband aside, and said, "I
don't like the looks of your wife at all."
"Me neither doc," said the husband. "But she's a great cook and
really good with the kids."
... That's sufficient
tasteless jokes for today. See you Monday. Have a great weekend. Hug the kids,
the grandkids and the wife. And for your sake, get some serious exercise.
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. Thus I cannot endorse any, though some look
mighty 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 Claire's
law school tuition. Read more about Google AdSense, click
here and here.