Technology Investor 

Harry Newton's In Search of The Perfect Investment Technology Investor. Auction Rate Securities. Auction Rate Preferreds.

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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.

Despite 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.

Life 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.

Can 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:

1. 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 all gone.

2. 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.

Two 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.

Second, BusinessWeek mentions me in this week's piece. My inclusion in the article made sense when you read my quote:

“I was 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 lessons.

First, Wall Street’s ‘research’ sucks. They are motivated by selling me something – anything – they can make money on. They make money on auction rate preferreds. They don’t make anything on money market funds.

Second, you can only rely on yourself for investing advice. Wall Street wraps itself in an aura of caring about its customers. It doesn’t. It cares only about itself. If I had adopted Wall Street’s 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:

Harry Newton, 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.

Escaping the grip of foreign oil: T. Boone Pickens writes in yesterday's Wall Street Journal:

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.

The problem, 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.

He likes wind energy and natural gas. For his entire piece, click here.

Siphoning 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 company’s 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 Detroit’s 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 company’s 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. ...

For the entire piece, click here.

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The 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 a cane.

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?'

The 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!'

The 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 tuition. Read more about Google AdSense, click here and here.

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