Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
9:00 AM EST, Thursday, January 29, 2009: Everyone
and their uncle have tightened their spending. This is bad for the economy
since 70% of our GDP is consumer spending. My Australian friend, Rob Douglass,
suggests that the economic stimulus program include a year's supply of Valium
for everyone over 18 with more than $100 of spendable money in their bank
the present feeling in Australia. "The water has disappeared from the
beach. We know a tsunami is coming. We just don't know how big it will be,
or when it will arrive."
that the program also include a Frequent Spender Program. Reward should
be a month's supply of Viagra. Anything to get the consumer's mind off his
humor is a sad commentary on the actual $819 billion "stimulus"
program which seems to me to be less about actually stimulating and more about
extending health care and unemployment benefits. But, like all Washington
financial legislation, there's weird stuff -- like exempting yacht-repair
companies from paying for federal workers' compensation insurance.
problem of the "stimulus" program is that (1) it's the creation
of politicians, (2) it follows the philosophy that says if you throw enough
money at a problem it will solve the problem and (3) it creates gigantic pressures
on the U.S. finances -- the dollar and its debts. It doesn't solve the housing
problem which got us into this mess.
Sadly, I don't
see an "Ah Hah!" investment idea. Buy healthcare? Buy a supercomputer
company. The Senate version of the stimulus bill includes $70 million for
a supercomputer at the National Oceanic and Atmospheric Administration. Just
what the world needs now.
In Davos, Professor
Nouriel Roubini reiterated his prediction that U.S. financial losses will
more than triple to $3.6 trillion and said that most banks in the U.S.
are insolvent and should be nationalized. The IMF predicted the global economy
will halt this year, brought down by more than $2 trillion of bad assets in
"sophisticated" investors are doing: They are doing two
the market in general and stocks in particular.
2. Playing around
with ETFs -- especially the single, double and triple ultrashort financial
funds -- e.g. SKF, UFG, FAZ, FAS, SRS, SRF. I know how bad it is when brokers
call me to tell their latest, best idea is the SKF. I can make 70% on my money
in ten days. And other fantasy. My nose tells me to shy well away. When Wall
Street creates a product to peddle to you and I, the product ultimately blows
up. I instance auction rate preferred. I don't know how these ETFs are going
to blow up. But blow up they will. Stay away. These things also go up and
down faster than a whore's drawers (Australian expression). They represent
a surefire way to make a small fortune -- so long as you start with a large
one. (Bad humor).
and bonuses. It's all Wall Street cares about. From
today's New York Times. Read and be sick.
Ink? Wall Street Paid Hefty Bonuses
By BEN WHITE
any measure, 2008 was a complete disaster for Wall Street except,
that is, when the bonuses arrived.
losses, multibillion-dollar bailouts and the passing of some of the most
prominent names in the business, employees at financial companies in New
York, the now-diminished world capital of capital, collected an estimated
$18.4 billion in bonuses for the year.
That was the
sixth-largest haul on record, according to a report released Wednesday by
the New York State comptroller.
payouts paled next to the riches of recent years, Wall Street workers still
took home about as much as they did in 2004, when the Dow Jones industrial
average was flying above 10,000, on its way to a record high.
took home millions last year even as their employers lost billions.
estimate, a closely watched guidepost of the annual December-January bonus
season, is based largely on personal income tax collections. It excludes
stock option awards that could push the figures even higher.
comptroller, Thomas P. DiNapoli, said it was unclear if banks had used taxpayer
money for the bonuses, a possibility that strikes corporate governance experts,
and indeed many ordinary Americans, as outrageous. He urged the Obama administration
to examine the issue closely.
issue of transparency is a significant one, and there needs to be an accounting
about whether there was any taxpayer money used to pay bonuses or to pay
for corporate jets or dividends or anything else, Mr. DiNapoli said
in an interview.
Yorks bankers and brokers are far poorer than they were in 2006, when
record deals, and the record profits they generated, ushered in an era of
Wall Street hyperwealth. All told, bonuses fell 44 percent last year, from
$32.9 billion in 2007, the largest decline in dollar terms on record.
But the size
of that downturn partly reflected the lofty heights to which bonuses had
soared during the bull market. At many banks, those payouts were based on
profits that turned out to be ephemeral. Throughout the financial industry,
years of earnings have vanished in the flames of the credit crisis.
to Mr. DiNapoli, the brokerage units of New York financial companies lost
more than $35 billion in 2008, triple their losses in 2007. The pain is
unlikely to end there, and Wall Street is betting that the Obama administration
will move swiftly to buy some of banks troubled assets to encourage
reluctant banks to make loans.
governance experts, investors and lawmakers question why financial companies
that have accepted taxpayer money paid any bonuses at all. Financial industry
executives argue that they need to pay their best workers well in order
to keep them, but with many banks cutting jobs, job options are dwindling,
even for stars.
Bebchuk, a professor at Harvard Law School and expert on executive compensation,
called the 2008 bonus figure disconcerting. Bonuses, he said,
are meant to reward good performance and retain employees. But Wall Street
disbursed billions despite staggering losses and a shrinking job market.
was neither the sixth-best year in terms of aggregate profits, nor was it
the sixth-most-difficult year in terms of retaining employees, Professor
DiNapoli, Professor Bebchuk said he was concerned that banks might be using
taxpayer money to subsidize bonuses or dividends to stockholders. What
the government has been trying to do is shore up capital, and any diversion
of capital out of banks, whether in the form of dividends or large payments
to employees, really undermines what we are trying to do, he said.
Jesse M. Brill,
a lawyer and expert on executive compensation, said government bailout programs
like the Troubled Asset Relief Program, or TARP, should be made more transparent.
all flying in the dark, Mr. Brill said. Companies can simply
say they are trying to do their best to comply with compensation limits
without providing any of the details that the public is entitled to.
by one troubled Wall Street firm, Merrill Lynch, have come under particular
scrutiny during the last week.
Cuomo, the New York attorney general, has issued subpoenas to John A. Thain,
Merrills former chief executive, and to an executive at Bank of America,
which recently acquired Merrill, asking for information about Merrills
decision to pay $4 billion to $5 billion in bonuses despite new, gaping
losses that forced Bank of America to seek a second financial lifeline from
Department official said that in the coming weeks, the department would
take action to further ensure taxpayer money is not used to pay bonuses.
Wall Street spent billions on bonuses, New York firms squeezed rank-and-file
executives harder than many companies in other fields. Outside the financial
industry, many corporate executives received fatter bonuses in 2008, even
as the economy lost 2.6 million jobs. According to data from Equilar, a
compensation research firm, the average performance-based bonuses for top
executives, other than the chief executive, at 132 companies with revenues
of more than $1 billion increased by 14 percent, to $265,594, in the 2008
For New York
State and New York City, however, the leaner times on Wall Street will hurt,
Mr. DiNapoli said.
said the average Wall Street bonus declined 36.7 percent, to $112,000. That
is smaller than the overall 44 percent decline because the money was spread
among a smaller pool following thousands of job losses.
said the reduction in bonuses would cost New York State nearly $1 billion
in income tax revenue and cost New York City $275 million.
On Wall Street,
where money is the ultimate measure, some employees apparently feel slighted
by their diminished bonuses. A poll of 900 financial industry employees
released on Wednesday by eFinancialCareers.com, a job search Web site, found
that while nearly eight out of 10 got bonuses, 46 percent thought they deserved
is motivation? Serena Williams is losing 7-5, 5-4.
back to win the match. What motivated her? In her own words,
thinking, 'Okay, if you lose, you're going to fly coach all the way back
to Florida', how uncomfortable that would be. That motivated me to do a
little better, I wouldn't necessarily want to go back on a 16-hour flight.
I wouldn't allow myself to have the emergency row either. I would be so
mad, I would have to sit in the last row, the tightest row. That way, I
wouldn't do it again."
Australian Open Tennis continues. Watch the
Roddick/Federer match. It's on today. I won't tell you who won.
Terrible golf joke.
A husband and wife are on the 9th green when suddenly she collapses
from a heart attack.
dear," she groans to her husband.
He quickly calls
999 on his mobile, and, after a brief conversation, picks up his putter and
lines up his stroke. His wife picks her head up off the green and stares at
over here and you're putting?"
worry dear," says the husband calmly. "They found a doctor on the
second hole and he's coming to help you."
how long will he take to get here?" she asks him feebly.
at all," says her husband. "Everybody has agreed to let him play
Two engineering students were walking across a university campus
when one said, 'Where did you get such a great bike?'.
The second engineer
replied, 'Well, I was walking along yesterday, minding my own business, when
a beautiful woman rode up on this bike, threw it to the ground, took off all
her clothes and said, 'Take what you want.'
The first engineer
nodded approvingly and said, 'Good choice; the clothes probably wouldn't have
fit you anyway.'
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
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