Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Wednesday, February 9, 2005: I
have resisted making a forecast for 2005. I wasn't sure how things were shaping
up. I am convinced that this will be a difficult year for all aspects of
our economy, especially technology and real estate. I believe 2005 will be a down
year for stockmarkets. There are several obvious reasons. The two great recent
growth engines are flagging. First, the bloom is off government spending -- which
boomed after 9/11/2001. Second, the US consumer is being hurt by rising interest
rates, soaring energy prices and higher health care costs. Meanwhile the government's
tax incentives of 2002-2004 have ended. Merger frenzy is cutting job after job.
And jobs are being lost as management ships its factories en masse to China. Today's
tech world, to quote Fred Hickey's latest newsletter, is "a tale of slumping
sales, falling orders and backlogs, plunging prices, building inventories, excess
[factory] capacities and job losses."
Last night I pondered what I'd learned on Friday and Saturday at the Arizona
Real Estate Investors Association meeting. And I wrote for the upcoming issue
of our magazine, Personal Real Estate Investor, "The signs are all around:
exploding prices, hefty influx of out-of-state investors, rehabbing and foreclosure
margins narrowing and a feeling not unlike the Tech Stock boom of the late 1990s."
I warned, "The boom in Arizona real estate is peaking. ... There remain
plenty of opportunities. But I want our readers to do their homework, do their
due diligence, don't over-commit themselves and don't make unrealistic assumptions
about prices continuing to float through the ceiling."
I am convinced
that the bursting real estate bubble will not produce a Tech Wreck of 2000-2001
in which tech stocks routinely dropped 80% and 90% and never came back. We're
looking at a flattening of Arizona price rises -- perhaps we'll see only a 5%
rise this year and some drops elsewhere in less buoyant, desirable places. Don't
forget that new home sales for the entire U.S. slumped 13.1% in
November, came back 0.1% in December, but were still 2% below December 2003.
January sales won't be out until the end of this month.
So where does
this all leave our 2005 investing?
+ Cash remains king.
+ Later this year, stocks and real estate should be cheaper. It will
be nice to have cash to take advantage of the opportunities.
+ Anything with income is better than stuff without. Dividend payers
will be increasingly relished.
+ We should reduce our equity holdings -- especially large companies
that will be hit by the consumer downturn, e.g. Wal-Mart.
+ We need to say NO even more selectively and do our due diligence more
thoroughly. One key factor I learned in Arizona is that when things boom, sellers
get sloppy with their facts and buyers don't check them enough -- figuring that
the continuing boom will compensate for their mistakes (or laziness).
recommendations are predictably bearish. Fred
Hickey writes the High-Tech Strategist newsletter. What makes his bearish
predictions more credible this time are his extensive research and his quoting
company after company reporting downturns in sales. There's too much detail
for this column. Suffice, Hickey owns put options on Best Buy, CDW, Dell,
Hewlett-Packard, Lexmark, Amazon, eBay, Google, Applied Materials, KLA-Tencor,
Texas Instruments, Research in Motion, Intel, Countrywide Financial, Capital
One and IBM.
Today I will buy some put options on some (not all) of these stocks. (Certainly
not HP, which will probably fly after today's news.) Many are of Hickey's shorts
are egregiously overpriced -- even if their sales and earnings were to
hold up. Which they won't. Hickey, who's been at this much longer than I have,
advises individual investors NOT to sell short, since the ups and downs
of ownership can be gut wrenching. The market doesn't always agree with you.
But the nice thing with options as against selling short is that the price of
the option is all you can lose -- as against selling short where you can lose
Online reports tonight: My brilliant son Michael's brilliant recommendation
-- Greenfield Online (SRVY) reports its earnings tonight at 5 PM on a
here. So far, Michael's brilliant recommendation has been a brilliant
failure, with its price dropping faster than a speeding bullet. My son is hoping
(praying) that this afternoon's conference call will be his salvation. Meantime,
I am presenting Greenfield's latest price chart and entitling it, in his honor,
How to connect to and from broadband while on the road:
Imagine a hotel room with a cabled broadband connection at an uncomfortable
desk or a horrid location. No sweat. Plug in your D-Link Pocket Router. Instantly
your cabled broadband is converted to wireless. You can now lounge comfortably
on your bed, catching up on emails and watching BubbleVision. I bought one of
these things because -- and I admit it -- I'm fascinated by technology travel
toys. It came yesterday. Last night I opened the box, plugged it in, ignored
the instructions and bingo, it worked flawlessly. I'm now transmitting this
column to the Internet over my D-Link Pocket Router.
There are three things I like about this $70 gadget: It works. It's tiny and
light -- no chunky, clunky power adapter. Third, it comes in its own cute, fake-pigskin
zip-up case. The case measures 5" x 6" x 1". You won't get a
hernia from packing it with on your next trip. You could use this thing as a
permanent wireless router in your home. But there are cheaper ways -- namely
the Linksys devices at your local Radio Shack.
Carly Fiorina has been fired. Hewlett-Packard Co.'s board announced
that Carly Fiorina has stepped down as chairman and chief executive, effective
immediately, over "strategic disagreements." Robert P. Wayman,
HP's chief financial officer, has been named interim CEO and appointed to the
board. Patricia C. Dunn, an HP director since 1998, has been named nonexecutive
chairman, also effective immediately, the company said. "While I regret
the board and I have differences about how to execute HP's strategy, I respect
their decision," said Ms. Fiorina in HP's press release. The board will
begin a search for a new CEO immediately.
Personally, I feel sadness at Carly's demise. How could she do this to me? I
now must find someone else to kick around. But whom? Got any suggestions?
time for geriatric sex therapy
A Florida couple, both well into their 80s, went to a sex therapist's
office. The doctor asks, "What can I do for you?"
The man says,
"Will you watch us have sexual intercourse?" The doctor gasps and
raises both eyebrows, but he is so amazed that such an elderly couple is asking
him to observe them, for his sexual advice, that he agrees.
When the couple
finishes, the doctor says, "There's absolutely nothing wrong with the way
you have intercourse." He thanks them for coming, wishes them good luck,
charges them $50 and he then says good bye.
The next week,
however, the couple returns and asks the sex therapist to observe them again.
The sex therapist is a bit puzzled, but
agrees, again amazed that they are on such a frequent sexual schedule at their
This happens again
over the next few weeks. Each time the couple makes an appointment, asks him
to observe, then has intercourse with no
problems, pays the doctor and leaves.
five or six weeks of this routine, the doctor says, "I'm sorry, but I have
to ask. Just what are you asking me to help you find out?"
The old man says,
"We're not asking you to find out anything. She's married and we can't
go to her house. I'm married and we can't go to my
house. The Holiday Inn charges $98. The Hilton charges $139. We do it here for
$50, and we get $43 back from Medicare.
for the absolute worst technology joke
Q: Why are there so
many Smiths in the phone book?
A: They all have phones.
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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