Previous Columns
9:00 AM EST, Friday, January 16, 2009: A reporter calls me and asks what are the investing lessons from this meltdown? My stab at them:

+ Stick with what you know. Your job. Your company. Your profession. Do it the best you possibly can. Concentrate on your first love.

+ Put the savings from your first love into the safest investment -- muni bonds or treasuries. Reinvest the interest.

+ Don't borrow anything. Don't buy stocks, houses, businesses or investments on margin. If you can't afford to write a check for that ritzy house, you can't afford to live in it.

+ Anything and everything hot today will be cold tomorrow. That includes newspapers, oil companies, gold companies, Chinese flu companies, housing makers... You name it. If you must play the "hot" game, do it with money you specifically designate as "fun." And don't forget our 15% Stop Loss Rule.

+ When in doubt, stay out. See below for Swiss banks.

+ Every investment you make requires accounting, tax forms and time beyond anyone's imagination. And if it blows up (as it most likely will), the time it will consume of your life will be monumental. It will take over your life.

+ Don't believe anything your friends tell you. They are no more qualified than you are. Worse, they have a big motivation to feed you stuff. They want to "big note" themselves. They want to impress you with their brilliance. Believe them, however, if they tell you to avoid something "like the plague." They undoubtedly have a good reason.

+ Stop eyeing your friends with jealousy. The life they're living neither they nor you can afford, or want. There is pleasure in simplicity. A Subaru gets you there just as fast as a Mercedes, and, yet, costs one third as much.

+ All the panoply of securities "regulation" (both government and exchange self-enforced) is nonsense. The SEC knew about Madoff and did nothing. End of that story.

+You can be protected from your own greed -- if you learn to say NO. Practice saying it every morning in the shower.

Jim Kingsdale's investment strategy. My friend Jim Kingsdale writes Energy Investment Strategies. He's just posted his latest newsletter, which includes

I am largely in cash. I’m not betting that Team Obama will or will not succeed. I’m trying to avoid being sucked into the market by bear market rallies.

The few equity positions I have relate to special situations. I own Lynas, (LYSCF) an Australian company that is opening the world’s largest deposit of Rare Earth Elements, minerals that are required for many applications including nickel metal-hydride batteries (now in nearly all hybrid cars presently on the market, and still baked into many new hybrid cars planned for future introduction). REE’s are coming into shorter supply as China - the major supplier - reduces its export quotas (recently by 32% with potentially more reductions coming). Lynas, a 25 cent stock, is a startup with production projected for late 2009. It seems to have outstanding management and financial backing (although, post-Madoff, who can have any confidence in judgments about people?).

I own some shares of Boone Pickens’ natural gas supply company, Clean Energy Fuels Corp (CLNE). He is developing the natural gas supply business for truck fleets in this country. Like everything in the market, the price of this company is way down. Analysts expect it to become profitable this year. I suspect there will be a slow transition toward natural gas for trucks.

I own some SQM, the Chilean minerals company about which I have written a great deal. In addition to its wonderful fertilizer and iodine businesses, SQM is the largest supplier of lithium, which may become a substantial part of the new electric car business.

When the economic clouds begin to pass - some months (or years) after Team Obama’s stimulus plan is passed and implemented at a cost of trill-a-dollars - there will be a move away from fear and towards greed, an anticipation of inflationary trends, and also a revulsion at the huge amount of debt that the U.S. government has put on its books. At that point the latest bubble, the high price of U.S. bonds, will burst, interest rates will rise, and the prices of bonds will fall. One will want to own an ETF that rises as bond prices fall. Such an ETF trades under the symbol TBT and I own some shares.

TBT is part of what I call my “farm system,” a stable of stocks that I know I’ll want to own later but would like to watch the movement of in the meantime. So I own a few shares (and I mean few) of TBT along with some real estate trusts, battery makers, and assorted “growth” vehicles - companies with business plans that make sense and/or stock prices that are crazy-low in any world except a deflationary one. One that I own in moderate size is TBS International (TBSI), a shipping company with a unique business plan that separates it from commodity shippers and makes its revenue less tied to the Baltic Dry Index, which is now in the pooper.

I also own some income producing stocks like Annaly Capital (NLY), Inergy (NRGY), Energy Transfer Partners (ETP), a pipeline company, and Brookfield Asset Management (BAM). They have attractive dividend yields and I think they have manageable risks in terms of a deflationary economy. Do your own research - on everything.

In short, I’m trying to dance to the strange and difficult music being played by this dangerous market - a market that is now eating up equity values but eventually will provide huge opportunities. I won’t get my cash to work at the exact bottom so I’ll miss some of those early gains. But in an economy that seems to be falling into deflation, which can last for an indeterminate period, I want to keep a lot of my funds in cash.

When in doubt, stay the hell out. Swiss banks make money by taking yours, waiting until you die and then keeping it. They don't make money by giving good advice. From the Wall Street Journal:

Inside a Swiss Bank, Madoff Warnings

LONDON -- Swiss bank Union Bancaire Privée kept hundreds of millions of dollars of its wealthy clients' money in Bernard Madoff's alleged Ponzi scheme despite warnings from its own research team, according to people familiar with the matter.

While others in the investment community had questioned Mr. Madoff's strategy and chosen to stay away, the instance offers a sign that red flags were raised within one of the large institutions that actually invested with Mr. Madoff.

Union Bancaire Privée, known as UBP and one of the largest investors in hedge funds globally, was part of an international network of so-called feeder funds that channeled money into Mr. Madoff's investment firm. The Geneva-based bank has said it has about $700 million in Madoff-related investments through its funds-of-funds and client portfolios.

By early 2007, though, UBP's research department had raised various concerns about Mr. Madoff's business, and later recommended that he be stricken from a list of fund managers approved for its clients' investments, according to people familiar with the matter and internal emails reviewed by The Wall Street Journal.

UBP executive Christophe Bernard, top, was among officers in an discussion recommending against investing with Bernard Madoff.

The people say that some of the bank's most senior executives were aware of the concerns and discussed them. It is unclear how the matter was resolved, but UBP ultimately left hundreds of millions of dollars of its clients' money with Mr. Madoff.

UBP has told clients it was the victim of a "massive fraud," and that it conducted due diligence, including visits with Mr. Madoff and various principals. A UBP spokesman Tuesday said: "We make no further comment at this stage, as the U.S. government is currently investigating the Madoff case."

In an email exchange during February and March 2008 reviewed by the Journal, UBP's then-deputy head of research, Gideon Nieuwoudt, listed a number of worries, including the lack of even basic information such as how much Mr. Madoff had in assets, how many feeder funds there were, and how the investment strategy worked.

In one email, Mr. Nieuwoudt said he had spoken to more than 100 funds that invest or had invested with Madoff, but none of them could explain how the strategy produced such consistent returns. "It all seems very opaque," wrote Mr. Nieuwoudt, who had previously worked for a hedge-fund consultant.

Mr. Nieuwoudt recommended in the email that Mr. Madoff be taken off UBP's list of approved funds, which included more than 200 asset managers that had cleared UBP's screening process.

Among those included in the email discussion were at least two members of UBP's executive committee: Christophe Bernard, who headed the asset-management business, and Michael de Picciotto, head of the bank's treasury. Mr. de Picciotto is a nephew of the bank's founder, who also plays an active role in the alternative-investment business.

The concerns were also discussed during at least one investment-committee meeting, according to people familiar with the matter.

The UBP spokesman said Messrs. de Picciotto and Bernard weren't available for comment. Mr. Nieuwoudt left UBP last year to join another firm.

UBP has said it took comfort from the fact that Mr. Madoff's firm was registered with the Securities and Exchange Commission, among other factors.
[swiss bank ubp and madoff] Reuters

In recent weeks, the bank has said it is reducing the number of funds on its approved list and is tightening its procedures for screening managers. For example, it is requiring all of its managers to use independent administrators, which help guard against fraud by serving as a third party responsible for confirming that a manager has the assets it says it does.

UBP invested with Mr. Madoff via four different feeder funds, including one run by Fairfield Greenwich Group of New York, one of the main conduits for investors in Mr. Madoff's funds. By early 2008, Mr. Madoff was among UBP's top five holdings, according to one of the people familiar with the matter.

Aside from its investments in Fairfield, UBP had close ties to the firm, providing advisory and other services to the management company of Fairfield's fund-of-funds division. Beyond that, three Fairfield funds invested in UBP's own Madoff feeder fund, called M-Invest Ltd., according to a person familiar with Fairfield.

As of October, the three funds had a total of about $200 million invested with UBP's M-Invest, this person said. The de Picciotto family originally created M-Invest as a way to invest family money with Mr. Madoff and later opened it to others.

Don't borrow money. It could imperil your future and everything you and your family have worked for. From Jan/Feb Atlantic magazine:

End Times

Virtually all the predictions about the death of old media have assumed a comfortingly long time frame for the end of print—the moment when, amid a panoply of flashing lights, press conferences, and elegiac reminiscences, the newspaper presses stop rolling and news goes entirely digital. Most of these scenarios assume a gradual crossing-over, almost like the migration of dunes, as behaviors change, paradigms shift, and the digital future heaves fully into view. The thinking goes that the existing brands—The New York Times, The Washington Post, The Wall Street Journal—will be the ones making that transition, challenged but still dominant as sources of original reporting.

But what if the old media dies much more quickly? What if a hurricane comes along and obliterates the dunes entirely? Specifically, what if The New York Times goes out of business—like, this May?

It’s certainly plausible. Earnings reports released by the New York Times Company in October indicate that drastic measures will have to be taken over the next five months or the paper will default on some $400 million in debt. With more than $1 billion in debt already on the books, only $46 million in cash reserves as of October, and no clear way to tap into the capital markets (the company’s debt was recently reduced to junk status), the paper’s future doesn’t look good.

“As part of our analysis of our uses of cash, we are evaluating future financing arrangements,” the Times Company announced blandly in October, referring to the crunch it will face in May. “Based on the conversations we have had with lenders, we expect that we will be able to manage our debt and credit obligations as they mature.” This prompted Henry Blodget, whose Web site, Silicon Alley Insider, has offered the smartest ongoing analysis of the company’s travails, to write: “‘We expect that we will be able to manage’? Translation: There’s a possibility that we won’t be able to manage.”

The paper’s credit crisis comes against a backdrop of ongoing and accelerating drops in circulation, massive cutbacks in advertising revenue, and the worst economic climate in almost 80 years. As of December, its stock had fallen so far that the entire company could theoretically be had for about $1 billion. The former Times executive editor Abe Rosenthal often said he couldn’t imagine a world without The Times. Perhaps we should start.

The best way to avoid a cold? Wash your hands. People infected with the rhinovirus (which causes colds) transferred it to 35% of the surfaces they touched, where it survived for up to 18 hours, according to a recent study at the University of Virginia. Exercise also boosts the body's production of disease-fighting white blood cells. A student in Medicine & Science in Sports found that physically active people suffered 20% fewer upper respiratory infections a year than their less active friends.

Australian Open Tennis begins this weekend. The huge time difference makes this ideal for TiVo. Enjoy.

For the full schedule go to Tennis.com.

A happy day at Wal-Mart. Morning tip: Twirl in front of the mirror before leaving the house.

Wall Street and the Olympics

Q: What is the one thing Wall Street and the Olympics have in common?
A: Synchronized diving.

Check out today's results from Merrill, Citibank and Bank of America.

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.