Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Friday, January 14, 2005:
My hot stock honchos have gone to cash. They're depressed about the stockmarket's
short term future. They believe they'll see more weakness in coming weeks. If
you're game for it, trading seems the only way to few scheckels today. It's
best to trade on news. Here was Apple (AAPL) yesterday. Big pop in the
morning as a result of the news. But the pop was too big. Therefore short it.
Buy back later in the day. I did the obvious. I bought early. It went up further.
Instead of selling instantly, I ignored it. By the I got back to the screen,
saw it falling and sold for a small loss. Lesson: If you trade, you got to stare
at the screen while you have open positions.
been cratering. Too much competition. But it has subscribers and it's growing.
It can't go to zero. Take a guess. I guessed $4. I got 5,000 shares. Now it's
up a little. Revenues are down. And earnings suck big time. It's time to take
my profits and get out.
AT&T (T) has to go lower. It has no future. No one wants to buy it.
And the business it's in -- long distance -- gets worse by the minute. My wife
is in Australia at present helping her father. I've been calling her for free
every day. How does AT&T compete against free? I sold it short at $18.50.
But it's stubbornly staying above that. I'm not worried. This is my long-term,
Never ever buy a mutual fund through your broker: I've
written that a million times. When I was young and stupid, Morgan Stanley bought
me a whole bunch of mutual fund B shares, which locked me into heavy penalties
for seven years. They omitted to tell me the "rules" on B shares.
Dreyfus did the same thing for my 401(k) plan. If you want further confirmation
of my rule about never buying mutual funds through your broker, check out today's
Wall Street Journal:
D. Jones & Co. received $82.4 million in secret payments from seven mutual-fund
firms in the first 11 months of 2004, through a lopsided fee structure that
in some cases gave the brokerage firm more compensation for selling poorly
performing funds than for selling stellar performers.
were posted yesterday, on Jones's Web site as required by its $75 million agreement
to settle regulatory charges that it failed to adequately disclose the payments
to investors. They are by far the most detailed figures ever made public on
the industry practice of mutual-fund companies paying brokerage firms to induce
them to sell their products, an arrangement known as revenue sharing.
Unlike front-end sales commissions, which are widely disclosed to consumers,
revenue sharing has been largely secret.
is legal, but federal and state regulators have argued that the industry's failure
to disclose the payments defrauds consumers by hiding brokers' conflicts of
interest. Federal regulators allege that the large payments that Edward D. Jones
got from its seven preferred mutual-fund families would cause brokers to pick
those funds over other fund companies that aren't paying the firm. ...
Edward D. Jones,
of St. Louis, has nearly 10,000 sales offices nationally, making it the largest
network of brokerage outlets in the U.S. ...
Jones's disclosures, the brokerage firm received two types of revenue-sharing
payments. One was a one-time payment based on the dollar amount of a particular
mutual-fund family's shares sold by Jones's brokers. The other: annual "asset
fees" based on the total value of a fund family's assets held by Jones's
one firm's funds over those of another, Jones could in a year's time earn up
to three times more in revenue-sharing monies -- and possibly even more
in some cases. Those payments, while paid to the firm as a whole, helped determine
bonuses paid to individual brokers.
Some of the
worst-performing fund families offered Jones the richest incentives to sell
their products. For example, Van Kampen Investments, which according to a Morningstar
Inc. analysis is one of the poorer performers in Jones's stable, paid a whopping
$22.24 per $10,000 of fund shares sold. By contrast, Lord Abbett & Co.,
one of the top-performing fund groups, didn't make any one-time payments based
on sales. Both funds groups paid similar amounts in continuing asset fees. Both
firms declined to comment.
a Jones broker who sold $1 million in Van Kampen funds last year would net a
one-time revenue-sharing payment of $2,224 for the firm, and assuming those
assets were held a year and didn't change in value, Jones would get an additional
$966 in asset fees. If the same broker sold a Lord Abbett investment under the
same conditions, the revenue-sharing payments would be only $1,000. .."
Alerts are really great: I love Google Alerts.
Try one. Put one in for your favorite stock. Then watch magic. To sign up for
this free service, click
So how LOW are the airlines' "new"pricing? They're
spending zillions hyping their new, cheaper, easier (no Sat night stays) fares.
Are they? I ran pricing this morning on New York to Los Angeles/Long Beach.
My conclusion: JetBlue is still the cheapest and the easiest to deal
with. I leave Sunday, come back Monday. JetBlue quotes $328 return. American
quotes fares from $576 to $916. Delta is $463 and United is $923. In short,
the BIG conventional airlines have still got a long way to go before their fares
become competitive. Cash your miles in fast. Take a trip. I'm betting some of
today's airlines are heading for the trash heap of failed airlines, which include
(in my days) Eastern and PanAm.
I found this ad on the Wall Street Journal's site this morning. It's
misleading. Maybe they got rid of the Saturday night stay. But their prices
are still far too high. I wonder if they'll ever be able to think like a discount
Mark your calendar: February 5 in Phoenix: I'm
speaking before the Arizona Real Estate Investors Association's Conference
at the Phoenix Civic Plaza. You can attend my talk for free. Or
the whole conference for $119. Click
here. I'm talking on "In Search of the
Perfect Investment -- Is it Real Estate?" Yesterday, they asked
for some words for their newsletter. I wrote:
before your conference at the ungodly hour of 8:30 AM on Saturday, February
5. If can get up that early and can postpone your golf game, youll find
it fun. Seven years ago I sold my business for cash (no less) and went In
Search of the Perfect Investment. That search took me from hedge funds
to private equity funds, to leveraged buyouts to stock options, to managed
foreign exchange trading and, in between, some stocks, some bonds, some professional
money managers and, most recently, real estate.
Along the way
Ive had ecstasy and depression. You dont want to know what the education
has cost in dollars and in aggravation. But the result has been serendipitous
at least for you. Ive figured a bunch of rules for successful investing,
which you wont find in any book at least not until I write it.
And Ive got lots of stories on how I personally got ripped off
and the lessons I learned from those ghastly experiences. Ill share them
with you at the talk.
One key rule youll
hear is Learn to say NO. Investments Ive said NO to in the
last seven years have made me far more money than those Ive
said YES to. There are a bunch I said YES to that I should have said NO to.
And Ive got some rules on them, too -- expensive rules.
big on due diligence. We dont do enough of it. Sometimes we get lazy.
I got lazy a few too many times and took people at their word. Sadly, most people
are as lazy (or as gullible) as I am (or was). Now, Ive got some rules
on doing a mean due diligence. Ill share them with you.
By now, youve
figured Im not your typical real estate lecturer who pumps
the obvious buy a distressed property, paint the front door, borrow oodles
from some unsuspecting bank and sell the property for 50% more the instant the
paint on the front door dries and the smell of baking bread wafts from the oven.
you. I have a little money. Im not young anymore. Im 62. Im
probably unemployable. I need to make sure that what I have lasts for my wife
and me. I heard that the best financial planning is to bounce the
check to your undertaker. Id like the kids to have something. They deserve
something after putting up with me for 40-plus years.
When you suddenly
get money from selling your business, you get pushed towards Wall Street. They
spend big money on advertising. Theyre in your face. They
run the worlds largest gambling machine also called the stockmarket.
Wall Streets last seven years were like something out of the bible
feasts, famines, plagues, locusts. More crooks and charlatans than you ever
imagined. Trillions of dollars evaporated overnight.
Wall Street prints
money. One day a company has ten million shares. The next day, the directors
vote themselves a million more shares. They have a reason or an excuse. They
say theyve done good work -- their own definition. The next
day there are 11 million shares, but the same company. Meantime, yours and my
shares in the company just got 10% less valuable.
print real estate. Thats one of its endearing qualities. It
exists because it exists. Its pure zen. Its unique. Next door is
not identical to next door. New York is not Phoenix. And Phoenix is not New
York (for which Phoenix should be eternally grateful).
I came to real
estate early and late in life. I bought my first New York apartment for $55,000
and sold it 30-years later for $3.8 million. I bought my second one for my son
in college and sold it three years later for a 30% profit which didnt
include the rent from roommates.
Since then Ive
invested fancy word for put my money --- in real estate syndications
and lending on California trust deeds. My syndications (fancy word for partnerships)
cover everything from office buildings in Washington, D.C. to shopping centers
in Rhode Island. I own a little of each property. Other investors own the rest.
The syndicator buys it, finances it, fixes it up, upgrades the tenancy, runs
it, refinances it and/or sells it.
start by paying 8% to 10% and then go up as they improve the buildings. Lately,
some syndicators have found that real estate craziness and the weakness of the
U.S. dollar means that its become time to sell some properties
even those they planned on holding for several years. I put $200,000 into one
and got $303,000 back in less than two years from March of 2003 to end-November
These days Ive
discovered something even better. Im working with Andrew Waite and his
great team on the magazine Personal Real Estate Investor Magazine. Were
focusing on of one of the hottest markets in the U.S. the southwestern
part of the U.S. The demographics are incredible everyone wants to live
and work here. There are wonderful opportunities for normal homes, for vacation
homes, for office buildings, for shopping centers. A perfect place to invest.
If you dont
have a copy of our magazine, go to your favorite local bookstore or pick one
up at the conference. You can subscribe on our web site www.PersonalRealEstateInvestorMag.com
for the grand sum of $24.95 a year. I promise you if you dont learn
enough to make yourself 100 times your subscription money, Ill personally
give you your money back and you can keep the magazines.
Heh. Cool it Harry.
Youre sounding too much like a huckster. Sorry about that. Suffice, Im
a lucky fellow, who sold a business, learned some rules about investing and
then discovered real estate. Meet me in Phoenix on Saturday February 5. Tell
me your experiences. Well all learn something. Get yourself a copy of
the latest issue of our super magazine.
story of the Good Samaritan
A Sunday school teacher was telling her class the story of the Good
Samaritan, in which a man was beaten, robbed and left for dead.
She described the situation in vivid detail so her students would catch the
Then, she asked the class, "If you saw a person lying on the roadside,
all wounded and bleeding, what would you do?"
A thoughtful little girl broke the hushed silence, "I think I'd throw up."
The story of Elijah
The Sunday school teacher was carefully explaining the story of Elijah
the Prophet and the false prophets of Baal. She explained
how Elijah built the altar, put wood upon it, cut the steer in pieces, and laid
it upon the altar.
And then, Elijah
commanded the people of God to fill four barrels of water and pour it over the
altar. He had them do this four times.
said the teacher! , "can anyone in the class tell me why the Lord would
have Elijah pour water over the steer on the altar?"
A little girl
in the back of the room started waving her hand, "I know, I know,"
she said, "to make the gravy!"
Sunday School teacher was describing how Lot's wife looked back and turned into
a pillar of salt, when little Johnny
interrupted, "My Mummy looked back once, while she was DRIVING," he
announced triumphantly, "and she turned into a telephone pole!"
A Sunday school teacher said to her children, "We have been
learning how powerful kings and queens were in Bible times. But, there is a
higher power. Can anybody tell me what it is?"
One child blurted
Nine year old Joey, was asked by his mother what he had learned in
our teacher told us how God sent Moses behind enemy lines on a rescue mission
to lead the Israelites out of Egypt. When he got to the Red Sea, he had his
engineers build a pontoon bridge and all the people walked across safely. Then,
he used his walkie-talkie to radio headquarters for reinforcements. They sent
bombers to blow up the bridge and all the Israelites were saved."
is that really what your teacher taught you?" his mother asked.
Mom. But, if I told it the way the teacher did, you'd never believe it!"
are closed on Monday. I need to spend the weekend writing.