Previous Columns
8:30 AM EST Friday, February 8, 2008: Some of us are about to lose 100% of our entire investments in various things. Losing all your money hurts. You can "justify" it in many ways. You earned it; it's yours to lose. It's an inevitable consequence of capitalism and a broad diversification program -- you didn't lose all of it.

The first "blame" is a lousy due diligence. Checking can protect you against obvious disasters. I'd be a billionaire today if I had $100 for each investment I didn't make. Due diligence doesn't protect you against a sound track record. The motto is "When in doubt, stay out." But what happens when you're not in doubt? Suddenly the sound long-term track record goes awry.

Three factors now become super important:

1. How quickly can you sell? The stockmarket is more liquid than a commercial building. You can't apply an Inviolate Stop Loss Rule to a building. You can to stocks.

2. What's the worst that can happen? Item: A man guaranteed the mortgage on a property. His net worth at the time was $100 million. By the time his guarantee was needed -- two years later -- his net worth was zero. He had invested in too much of the wrong thing. True story.

2. What does the chart look like? Here are two charts that Blind Freddie couldn't misread. You can smell the disaster coming. Were we all morons to miss the sharp move above the trendline?

It is your money and so what if the wife said "No more than $35 million!" which she did to Mitt.

$50 million personal money: Trying to buy the presidency.

‘An Intolerable Fraud’: From today's New York Times editorial:

An envelope arrived in our office the other day. It had the bulky, tawdry look of junk mail: pink and lavender Easter eggs, a plastic address window and a photo of a young man in fatigue shorts using crutches to stand on his only leg. “Thousands of severely wounded troops are suffering,” it read. “Will you help them this Easter?”

It was a plea for money from the Coalition to Salute America’s Heroes, one of the worst private charities — but hardly the only — that have been shamefully milking easy cash from the suffering and heartache caused by the wars in Afghanistan and Iraq.

The coalition and its sister organization, Help Hospitalized Veterans, were among a dozen military-related charities given a grade of F in a study last December by the American Institute of Philanthropy, a nonprofit watchdog group. These and other charities have collected hundreds of millions of dollars from kind-hearted Americans and squandered an unconscionable amount of it on overhead and expenses — 70 percent or 80 percent, or more. The usual administrative outlay for a reputable charity is about 30 percent. Money that donors surely assumed was going to ease the pain and speed the healing of injured soldiers went instead to junk-mail barrages, inflated executive salaries and other forms of corporate-style bloat.

It’s all legal. There is very little regulation in the charity game, and if someone like Roger Chapin, the “nonprofit entrepreneur” who founded the Coalition to Salute America’s Heroes and Help Hospitalized Veterans, wants to mismanage your money, he has great leeway in doing so. His veterans’ charities raised more than $168 million from 2004 to 2006, but spent only a pittance — about 25 percent — to help veterans. The rest, nearly $125 million, went to fund-raising, administrative expenses, fat salaries and perks. Mr. Chapin gave himself and his wife $1.5 million in salary, bonuses and pension contributions over those three years, including more than $560,000 in 2006. The charities also reimbursed the Chapins more than $340,000 for meals, hotels, entertainment and other expenses, and paid for a $440,000 condominium and a $17,000 golf-club membership.

And what did the soldiers get? Try almost $18.8 million in “charitable” phone cards sent to troops overseas in 2006 — not to let them call their families, but rather to call up a stateside business that sells sports scores.

Representative Henry Waxman, Democrat of California, whose Committee on Oversight and Government Reform has held hearings on the issue and documented the above abuses, has rightly called the conduct of charities like Mr. Chapin’s “an intolerable fraud.”

Mr. Waxman deserves credit for exposing it, but Congress should follow through with stricter oversight and disclosure rules so Americans don’t have to rely on House committee hearings to know where their money is being misspent.

Meanwhile, if you happen to get a mailing from the Coalition to Salute America’s Heroes, by all means open it. Look the contents over — the glossy bunny greeting card, the earnest letter from the retired Brig. Gen. Chip Diehl — then shred or recycle it or both. And think of what Mr. Chapin told the House committee when asked what would happen if his charities ever told donors where their money went.

“If we disclose, which I’m more than happy to do,” he said, “we’d all be out of business. Nobody would donate. It would dry up.”

Poetic Justice for dumb bankers: From Bloomberg:

The woes in the United States financial sector are “poetic justice” for bankers who designed and sold complex investments that have since gone sour, Mr. Buffett said on Wednesday.

Mr. Buffett, the head of Berkshire Hathaway and one of the world’s wealthiest people, appeared to see irony in the fallout hitting many of the banks who marketed complex investments that have now crashed.

“It’s sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end,” Mr. Buffett said during a question and answer session at a business event in Toronto.

Mr. Buffett also played down worries about a credit crunch by saying that recent interest rate cuts mean low-cost funds are readily available.

Instead, he said, the turmoil that has rocked the nation’s economy in recent months has imbued the markets with a healthy degree of caution, while the rate-cutting response from central bankers has ensured that cheap money remains available for borrowing.

“I wouldn’t quite call it a credit crunch. Funds are available,” Mr. Buffett said. “Money is available, and it’s really quite cheap because of the lowering of rates that has taken place.”

He added: “What has happened is a repricing of risk and an unavailability of what I might call ‘dumb money,’ of which there was plenty around a year ago.”

U.S. border agents are searching and detaining laptops and cellphones. One border agent found a laptop with child pornography. The U.S. government has argued in a pending court case that its authority to protect the country's border extends to looking at information stored in electronic devices such as laptops without any suspicion of a crime. In border searches, it regards a laptop the same as a suitcase.

Kamran Habib, a software engineer with Cisco Systems, has had his laptop and cellphone searched three times in the past year. Once, in San Francisco, an officer "went through every number and text message on my cellphone and took out my SIM card in the back," said Habib, a permanent U.S. resident. "So now, every time I travel, I basically clean out my phone. It's better for me to keep my colleagues and friends safe than to get them on the list as well."

An article in yesterday's Washington Post instanced others who had their laptops and cellphones searched and seized. Please be careful. Click here.

Bigamy has its rewards -- in England: From the Sunday Telegraph:

Husbands with multiple wives have been given the go-ahead to claim extra welfare benefits following a year-long Government review. Even though bigamy is a crime in Britain, the decision by ministers means that polygamous marriages can now be recognised formally by the state, so long as the weddings took place in countries where the arrangement is legal.

The outcome will chiefly benefit Muslim men with more than one wife, as is permitted under Islamic law. Ministers estimate that up to a thousand polygamous partnerships exist in Britain, although they admit there is no exact record. ...

New guidelines on income support from the Department for Work and Pensions (DWP) state: "Where there is a valid polygamous marriage the claimant and one spouse will be paid the couple rate ... The amount payable for each additional spouse is presently £33.65."

Income support for all of the wives may be paid directly into the husband's bank account, if the family so choose. Under the deal agreed by ministers, a husband with multiple wives may also be eligible for additional housing benefit and council tax benefit to reflect the larger property needed for his family.

The ruling could cost taxpayers millions of pounds. ...

Islamic law permits men to have up to four wives at any one time -- known as a harem -- provided the husband spends equal amounts of time and money on each of them.

I went to the dentist on Monday. It was awful. For two hours of pain, I paid $1,700. It could have been worse:

He ordered one hamburger, one order of French fries and one drink. The old man unwrapped the plain hamburger and carefully cut it in half. He placed one half in front of his wife. He then carefully counted out the French fries, dividing them into two piles and neatly placed one pile in front of his wife.

He took a sip of the drink, his wife took a sip and then set the cup down between them. As he began to eat his few bites of hamburger, the people around them kept looking over and whispering. You could tell they were thinking, "That poor old couple - all they can afford is one meal for the two of them."

As the man began to eat his fries a young man came to the table. He politely offered to buy another meal for the old couple. The old man said they were just fine - They were used to sharing everything.

The surrounding people noticed the little old lady hadn't eaten a bite. She sat there watching her husband eat and occasionally taking turns sipping the drink.

Again the young man came over and begged them to let him buy another meal for them. This time the old woman said "No, thank you, we are used to sharing everything."

As the old man finished and was wiping his face neatly with the napkin, the young man again came over to the little old lady who had yet to eat a single bite of food and asked "What is it you are waiting for?"

She answered, "The teeth."

This week's columns have been among the best I've ever written. If you didn't read them all, please go back.

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.