Harry Newton's In Search of The Perfect Investment
Technology Investor. Auction Rate Securities. Auction Rate Preferreds.
9:00 AM EST Thursday, July 10, 2008: The
good news: I recommended getting completely out of equities in mid-November.
The bad news: I did not recommend shorting as aggressively as I should have.
I simply did not anticipate the extent of the carnage. This is major carnage.
The headlines show 20%+ drops since this bear market started. But that ignores
the real carnage in the financials (especially Freddie Mae and Freddie Mac,
now teetering on insolvency) and the auto makers, amongst others.
today's "low" prices, this is not the time to get back in. There will
be more carnage, especially among financials. And you could happily short some
of them -- like UBS, Citigroup, Capital One Financial, Merrill Lynch and my
favorite Lehman Brothers (now under $20 again). Or you could simply buy SKF,
the ultrashort financial ishare which has done handsomely of late. I'm not recommended
SKF. I prefer shorting individual companies. Frankly, I can see no compelling
reason to buy any financial today and I think most investors feel the same way.
One after another is being taken out to the woodshed and shot.
Among the gloom
and doom are great business opportunities -- especially among automating business
processes for employee-strapped large companies. More about that later.
lessons from yesterday's tennis: My knees hurt.
My back hurt. My stomach was screaming. My opponent was determined to win. I
said to myself "I'm going to work through the pains and win." And
I did in a very close tiebreaker. It felt good. The pain completely went away
when I got home, ate something and napped for 45 minutes.
you believe anything you read in the press or get sent on the Internet? The
simple answer is NO. Two trends are working against truth:
The firing of newspapers reporters. When I worked at BusinessWeek, they
had fact checkers. If a reporter mentioned or quoted someone in an article,
the fact checker would call and read the piece back. No more. Those guys are
The Internet. It's simply too easy to believe what's on a site or to forward
the latest crap that floats into your inbox and send it to your friend who'll
send it to the another 50 of his nearest and dearest.
items: Yesterday's piece on Julie Andrews singing a geriatric version of My
Favorite was total rubbish. Sorry about that. It's all over the web, on many
sites. But it's wrong. 100% wrong.
BusinessWeek mentions me in this week's piece. My inclusion in the article made
sense when you read my quote:
sold my auction rate preferreds securities as 100% cash equivalents by a broker
who spends the better part of each day researching securities.
I learned two
Streets research sucks. They are motivated by selling me
something anything they can make money on. They make money on
auction rate preferreds. They dont make anything on money market funds.
can only rely on yourself for investing advice. Wall Street wraps itself in
an aura of caring about its customers. It doesnt. It cares only about
itself. If I had adopted Wall Streets attitude in my old business, I
would have lasted a day no more.
But the quote
got cut "for space reasons" and what the article appeared with was
one paragraph, sitting lonely all by itself:
66, sold his telecom industry publishing business a few years ago and ended
up with $3.5 million stuck in auction-rate securities pitched as cash equivalents,
he says. The yield was slightly higher than on money- market funds, so he'd
invested. But in February the market seized up, trapping Newton's money.
Oh by the way
BusinessWeek, my entire net worth is not stuck in auction-rate preferreds --
which, ironically, will be one of this year's better investments.
the grip of foreign oil: T. Boone Pickens writes
in yesterday's Wall Street Journal:
He likes wind energy
and natural gas. For his entire piece, click
I'm 80 years
old and I've been an oilman for almost 60 years. I've drilled more dry holes
and also found more oil than just about anyone in the industry. With all my
experience, I've never been as worried about our energy security as I am now.
Like many of us, I ignored what was happening. Now our country faces what
I believe is the most serious situation since World War II.
of course, is our growing dependence on foreign oil it's extreme, it's
dangerous, and it threatens the future of our nation.
Let me share a few facts: Each year we import more and more oil. In 1973,
the year of the infamous oil embargo, the United States imported about 24%
of our oil. In 1990, at the start of the first Gulf War, this had climbed
to 42%. Today, we import almost 70% of our oil.
This is a staggering
number, particularly for a country that consumes oil the way we do. The U.S.
uses nearly a quarter of the world's oil, with just 4% of the population and
3% of the world's reserves. This year, we will spend almost $700 billion on
imported oil, which is more than four times the annual cost of our current
war in Iraq.
In fact, if
we don't do anything about this problem, over the next 10 years we will spend
around $10 trillion importing foreign oil. That is $10 trillion leaving the
U.S. and going to foreign nations, making it what I certainly believe will
be the single largest transfer of wealth in human history.
G.M.'s future. With GM at its lowest price
in 50 years, there is serious talk of bankruptcy. My favorite financial reporter,
Roger Lowenstein has these words in a New York Times piece today.
WHO shot General
Motors? The companys stock is at its lowest level in 50 years, and its
market valuation has plunged to $5.9 billion, less than that of the Hershey
candy-bar company. The automaker is weighing yet another round of layoffs
and maybe even a fire sale of venerable brands like Buick and Pontiac.
General Motors once manufactured half the cars on the American road, but now
it sells barely 2 in 10. Bankruptcy is not unthinkable for Detroits
former king. The immediate cause of G.M.s distress, of course, is the
surging price of oil, which has put a chill on the sale of gas-guzzling sport
utility vehicles and trucks. The companys failure to invest early enough
in hybrids is another culprit. Years of poor car design is another.
But none of
G.M.s management miscues was so damaging to its long-term fate as the
rich pensions and health care that robbed General Motors of its financial
flexibility and, ultimately, of its cash. ...
the entire piece, click
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dubious joys of flying -- 1:
The airline pilot hammered his ship into the runway really hard.
He stood by the door while the passengers exited. He smiled, and give them a
'Thanks for flying our airline.' He worried about his bad landing and the comments
it might attract. Finally everyone was off except for a little old lady with
She said, 'Sir,
do you mind if I ask you a question?'
'Why, no, Ma'am,'
said the pilot. 'What is it?'
The little old
lady said, 'Did we land, or were we shot down?'
dubious joys of flying -- 2:
An American Airlines flight into Amarillo suffered a hard landing.
The Flight Attendant
got on, 'Ladies and Gentlemen, welcome to Amarillo. Please remain in your seats
with your seat belts fastened while the Captain taxis what's left of our airplane
to the gate!'
dubious joys of flying -- 3:
After a real crusher of a landing in Phoenix , the attendant came on with, 'Ladies
and Gentlemen, please remain in your seats until Captain Crash and his Crash
Crew have brought our aircraft to a screeching halt. Once the tire smoke has
cleared and the warning bells are silenced, we'll open the door and you can
pick your way through the wreckage to the terminal.'
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
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here and here.