Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
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8:30 AM EST Thursday, January 17, 2008:
Sad, but good news: Law firms are firing lawyers in securitization.
I
dropped into San Diego for a day. I come back rejuvenated. California's
enthusiasm for business, for life and for family is contagious. Everyone should
drop in once a month for their "fix." The daytime portion of my trip
-- from San Diego to Dallas -- was magical. I sat three hours staring out the
window, transfixed by the pure white clouds, the purple sky and the thousands
of homes that don't have defaulted subprime mortgages.
In
California, I saw exciting products that will change our lives -- honestly.
I heard of neat ways to search for new investments. I saw tired investments
being rejuvenated. And surprise, surprise, the trip was painless. I went American.
Yes, tired old American. New York to San Diego left on time and arrived one
hour early! San Diego to Dallas arrived 30 minutes early. Dallas to New York
left an hour late, but was painless. Plane travel has become painless. Well,
this trip was. The key is to mooch your way into first class. The payoff: you
can work; you get to meet neat people with neat stories. The credit union exec
was pleased with herself. "I got heavy flack because I wouldn't loan subprime.
They were just bad loans." Now she's sitting pretty in first class. A new
industry is emerging: servicing subprime loans for lenders, many of whom have
never talked to a borrower. Surprise. Surprise. There are many people who would
actually like to keep their homes.
Everyone
is sitting on cash. Everyone is trolling for new investments, fixing old ones.
Everyone is super-careful. Capital markets may be seized. Billions of dollars
are being lost. Some houses will be looted. Some will be burned (arson is an
alternative). Some will be razed. And some will be bought by bargain hunters.
But, in time, all this shall pass. And our present problems will become but
a distant memory.
Is
now the time to troll for "cheap" stocks? I don't believe so. Upcoming
poor earnings reports are likely to further shock equity markets. But then,
I'm no genius on timing. I shorted Citigroup. It released its "lack of
earnings." It fell. I covered the short, figured the news I was awaiting
was out. End of story. Wrong. The stock fell more. So much for my timing. Fortunately,
no one (including me) went broke making a profit, albeit a small one.
And everywhere
there are the entrepreneurs. My new friend Barry Rederman turned his hobby of
collecting old maps into a profitable online business. Check out Antique
Maps Inc. Nice web site. Nice business. Talented man.
Has the present
stockmarket downturn been overdone? Perhaps yes. My favorite financial reporter,
James Surowiecki, did this piece for the latest January 21 issue of New Yorker.
It's really good:
Running Numbers
American
investors began 2008 with a simple New Years resolution: sell. The result
was the worst start of a year in the S. & P. 500s history, with
the index falling more than five per cent over the first five days of trading.
Explaining market moves is usually a mugs game, but its clear
that one of the main causes of the sell-off was this months labor-market
report, which showed job growth in December at a virtual standstill and unemployment
jumping to five per cent. For many investors, that news seemed to confirm
their deepest anxiety: a recessionor at least a stagnationis at
hand.
This may well
be so, but the decisiveness of Wall Streets response to the numbers
was still puzzling, since employment statistics are notoriously muddy. To
begin with, the two numbers that the government reports each monthone
measuring the unemployment rate and the other job growthare based on
very different surveys, and they frequently offer conflicting snapshots of
the economy. The employment, or household, survey looks at sixty thousand
households, and last month it saw a sharp increase in the number of people
without jobs. The payroll report, by contrast, surveys four hundred thousand
business and government establishments, and last month it said that the economy
actually added eighteen thousand new jobs. Furthermore, both estimates are
significantly imprecise: the payroll report has a sampling error of as much
as plus or minus a hundred thousand jobs (which means that, instead of gaining
eighteen thousand jobs last month, we may have lost eighty-two thousand),
while the household surveys error margin is even bigger, at plus or
minus four hundred thousand jobs. The payroll numbers are also subject to
big revisions: in September, the government reported that the economy had
lost four thousand jobs the previous month, but a later update said that eighty-nine
thousand jobs had been created.
This uncertainty
has made job numbers a favorite target of pundits, who dismiss them as meaningless
and irrelevant, and accuse the Bureau of Labor Statistics of numerical
flimflammery. The payroll report has also become a flash point for political
arguments. A few years ago, when the report showed the creation of surprisingly
few jobs despite brisk economic growth, Republicans attacked it for missing
the boom in self-employment and new-business growth, insisting that the household
survey, which showed very low unemployment, was a better indicator.
Flawed as they
are, though, the employment numbers represent a dramatic and valuable economic
innovation. The idea that the government can and should give the public a
reliable picture of the economy is a surprisingly recent one. It wasnt
until the Great Depression that the government began calculating a national
employment rate, and its only in the postwar era that employment data
have been systematically and rigorously collected. And if the results are
imperfect, thats because collecting up-to-date, accurate information
about the U.S. economy, where millions of jobs are created and lost every
year, is remarkably difficult. Imagine that youre expected to track
every job that has been created or lost this month. The new coffee shop that
opened up in Baton Rouge, the guy who just got fired from your local auto-repair
shop, and that kid who left his job to go to law schoolyou need to account
for all of them. And you have to do this without much enforcement power or
surveillance ability. Most respondents arent obliged to get back to
you in a timely fashiona major reason for the job-number revisions is
that only two-thirds of surveyed businesses answer promptlyand theres
no monthly registry for new companies or for businesses that go under. Good
luck.
Faced with
this task, one option is to confine yourself to the data from the surveys,
without trying to make up for what you know youre missingnew businesses,
failing businesses, and so on. Another is to try to fill those gaps using
statistical techniques and past data, and to create models that calculate
how many new jobs youve missed. The payroll survey does the latter,
relying on whats called the birth/death model to estimate how many new
jobs are being created (and how many old ones lost) as companies open and
close their doors. This model is, by definition, an estimate, and at times
when the economy is changingmoving from recession to boom, or vice versaguesses
are more likely to be off. Thats why youll sometimes read, from
job-numbers skeptics, that half the new jobs reported this month were the
result of the governments statistical adjustments, with the clear implication
that those jobs dont really exist. Yet studies that measure the government
estimates against hard data, like unemployment-insurance tax rolls, have found
that the birth/death model makes those estimates more accurate.
The paradoxical
truth about the jobs numbers is that they are much better than their critics
say they are but nowhere near as good as investors believe them to be. As
many studies have shown, people dont have an intuitive understanding
of things like margins of error and random sampling; they prefer to focus
on a single number, even if its falsely precise, and so end up overemphasizing
the reports headline number. Investors are also subject to the so-called
salience biashigh-profile information is weighted heavily
even if its flawed. Thats why market moves in response to government
reports are often surprisingly bigespecially when, as now, they seem
to substantiate investors worst fears. At this point, the market is
locked in a hard-to-break feedback loop: the fact that traders act as if the
jobs report were definitive makes it so. A little information can be a dangerous
thing.
Something
to do while you wait.
Only 40% of adults between 50 and 64 have had
a colonoscopy These things will save your life. Please have one. Bonus: You
can practice your one liners. My favorite: "Doc, can you please write a
note to my wife affirming that you didn't find my head up there."
Luck
has its charm.
Little Bruce and Jenny are only 10 years old, but they know they
are in love. One day they decide that they want to get married, so Bruce goes
to Jenny's father to ask him for her hand.
Bruce bravely
walks up to him and says, "Mr. Smith, me and Jenny are in love and I want
to ask you for her hand in marriage."
Thinking that
this was just the cutest thing, Mr. Smith replies, "Well Bruce, you are
only 10. Where will you two live?"
Without even taking
a moment to think about it, Bruce replies, "In Jenny's room. It's bigger
than mine and we can both fit there nicely."
Still thinking this is just adorable, Mr. Smith says with a huge grin, "Okay
then how will you live? You're not old enough to get a job. You'll need to support
Jenny."
Again, Bruce instantly
replies, "Our allowance. Jenny makes five bucks a week and I make 10 bucks
a week. That's about 60 bucks a month and that should do us just fine."
Mr. Smith is impressed Bruce has put so much thought into this. 'Well Bruce,
it seems like you have everything figured out. I just have one more question.
What will you do if the two of you should have little ones of your own?"
Bruce just shrugs
his shoulders and says, "Well, we've been lucky so far."
Mr. Smith no longer
thinks the little shit is adorable.
The
Australian Tennis Open is on. And the matches are
wonderful.
Date |
EST
Time
|
Round |
Channel |
January
17 |
8:00
AM
|
Early
Round |
Tennis
Channel |
January
17 |
3:00
PM
|
Early
Round |
ESPN2/ESPN
Classic |
January
17 |
7:00
PM (Live)
|
Early
Round |
Tennis
Channel |
January
17 |
9:00
PM (Live)
|
Early
Round |
ESPN2/ESPN
Classic |
January
18 |
3:30
AM (Live)
|
Early
Round |
ESPN2/ESPN
Classic |
January
18 |
8:00
AM
|
Early
Round |
Tennis
Channel |
January
18 |
3:00
PM
|
Early
Round |
ESPN2/ESPN
Classic |
January
18 |
7:00
PM (Live)
|
Early
Round |
Tennis
Channel |
January
18 |
10:00
PM (Live)
|
Early
Round |
ESPN2/ESPN
Classic |
January
19 |
3:30
AM (Live)
|
Early
Round |
ESPN2/ESPN
Classic |
January
19 |
8:00
AM
|
Early
Round |
Tennis
Channel |
January
19 |
12:00
PM
|
Early
Round |
ESPN2/ESPN
Classic |
January
19 |
5:00
PM
|
Early
Round |
Tennis
Channel |
January
19 |
7:00
PM (Live)
|
Early
Round |
Tennis
Channel |
January
19 |
10:00
PM (Live)
|
Early
Round |
ESPN2/ESPN
Classic |
January
20 |
3:30
AM (Live)
|
Early
Round/Round of 16 |
ESPN/ESPN2 |
January
20 |
8:00
AM
|
Early
Round |
Tennis
Channel |
January
20 |
11:00
AM
|
Early
Round |
ESPN/ESPN2 |
January
20 |
3:00
PM
|
Early
Round |
Tennis
Channel |
January
20 |
7:00
PM (Live)
|
Round
of 16 |
ESPN/ESPN2 |
|
Week 2
Date |
EST
Time
|
Round |
Channel |
January
21 |
3:30
AM (Live)
|
Round
of 16/Quarterfinals |
ESPN2/ESPN
Classic |
January
21 |
8:00
AM
|
Round
of 16/Quarterfinals |
Tennis
Channel |
January
21 |
3:00
PM
|
Round
of 16/Quarterfinals |
ESPN2/ESPN
Classic |
January
21 |
7:00
PM
|
Round
of 16/Quarterfinals |
Tennis
Channel |
January
21 |
9:00
PM (Live)
|
Round
of 16/Quarterfinals |
ESPN2/ESPN
Classic |
January
22 |
3:30
AM (Live)
|
Quarterfinals |
ESPN2/ESPN
Classic |
January
22 |
8:00
AM
|
Quarterfinals |
Tennis
Channel |
January
22 |
3:00
PM
|
Quarterfinals |
ESPN2/ESPN
Classic |
January
22 |
7:00
PM
|
Quarterfinals |
Tennis
Channel |
January
22 |
9:00
PM (Live)
|
Quarterfinals |
ESPN2/ESPN
Classic |
January
23 |
3:30
AM (Live)
|
Quarterfinals |
ESPN2/ESPN
Classic |
January
23 |
8:00
AM
|
Quarterfinals |
Tennis
Channel |
January
23 |
3:00
PM
|
Quarterfinals |
ESPN2/ESPN
Classic |
January
23 |
7:00
PM
|
Quarterfinals |
Tennis
Channel |
January
23 |
9:30
PM (Live)
|
Women's
Semifinals |
ESPN2/ESPN
Classic |
January
24 |
1:00
AM
|
Semifinals |
Tennis
Channel |
January
24 |
3:30
AM (Live)
|
Men's
Semifinals |
ESPN2 |
January
24 |
6:00
AM
|
Semifinals |
Tennis
Channel |
January
24 |
3:00
PM
|
Men's
Semifinals (Repeat) |
ESPN2 |
January
24 |
6:00
PM
|
Semifinals |
Tennis
Channel |
January
24 |
11:00
PM (Live)
|
Women's
Doubles Final |
Tennis
Channel |
January
25 |
1:00
AM
|
Women's
Doubles Final (Repeat)/Semifinals |
Tennis
Channel |
January
25 |
3:30
AM (Live)
|
Men's
Semifinals |
ESPN2 |
January
25 |
6:00
AM
|
Women's
Doubles Final (Repeat)/Semifinals |
Tennis
Channel |
January
25 |
3:00
PM
|
Men's
Semifinals (Repeat) |
ESPN2 |
January
25 |
6:00
PM
|
Women's
Doubles Final (Repeat)/Semifinals |
Tennis
Channel |
January
25 |
9:30
PM (Live)
|
Women's
Final |
ESPN2 |
January
25 |
11:30
PM (Live)
|
Men's
Doubles Final |
Tennis
Channel |
January
26 |
1:00
AM
|
Men's
Doubles Final (Repeat) |
Tennis
Channel |
January
26 |
1:00
PM
|
Men's
Doubles Final (Repeat) |
Tennis
Channel |
January
27 |
12:00
AM (Live)
|
Mixed
Doubles Final |
Tennis
Channel |
January
27 |
1:30
AM
|
Mixed
Doubles Final (Repeat) |
Tennis
Channel |
January
27 |
3:30
AM (Live)
|
Men's
Final |
ESPN2 |
January
27 |
12:00
PM
|
Men's
Final (Repeat) |
ESPN2 |
January
27 |
3:00
PM
|
Men's/Women's
Finals (Repeat) |
Tennis
Channel |
|

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
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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
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here and here.
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