Harry Newton's In Search of The Perfect Investment
Technology Investor. Auction Rate Securities. Auction Rate Preferreds.
9:00 AM EST Friday, July 18, 2008: No
market goes straight down or straight up. Every bear market has rallies. Every
bull market has drops. I'm impressed with the last two days. But I don't believe
it's time to sing "Happy Days are Here Again."
stockmarket, according to contemporary wisdom, reflects things happening nine
to 12 months out. Will the economy be happy then? I doubt it. Here's something
that just came in from the news web site,
Indicators in Recession Territory
Economic Indicators (LEIs) have not been are not my favorite of all data points.
Long term readers
may recall my ire over the way the Conference Bureau tweaked the calculating
of the Leading Economic Indicators' in terms of the yield curve in order to
make them more bullish. Hence, why I look at them somewhat askance (NT's Paul
Kasriel has convinced me this is a hasty opinion on my part).
rely on the Conference Board's Juiced Data, we can turn instead to the Economic
Cycle Research Institute (ECRI) data leading indicators. Their indicators
have a very good track record of forecasting recessions.
Indicators Index in Recession Territory
weekly leading economic index is now deep into the territory associated with
recessions. Its down over 10% this month, and this week is running down 8%
on a year-over-year basis. As the chart above shows, that is something that
only happens when the economy is in recession.
It may be time
to go short again. We're not out of the woods with this bear market.
is King. I opened a $95,000 CD yesterday at the Park Avenue Bank,
a tiny bank with no exposure to subprime. They're paying a whopping 4.75% on
a 90-day CD. They only want locals and locals fronting up personally to their
bank. Check with Mercedes or Anthony. They're at 212-220-0878.
I'm still worried
about banks. Sentiment changes quickly. The lines form. And the bank collapses.
I prefer $95,000 in each FDIC-insured bank -- rather than joint and multiple
accounts at the same bank. I don't want to muddy up the lives of the FDIC bureaucrats.
is working. I got stuck in $4.5 million of
auction rate preferreds back in mid-February when the auctions collapsed. I
was furious with the issuers. I started a site called www.AuctionRatePreferreds.org
specifically to bring news and advice to the thousands of fellow sufferers.
My key advice has been to kick up a fuss, especially with state and federal
regulators. Tell them how you were lied to about these auction rate securities
being "cash equivalents." That strategy has been working. Yesterday
regulators from 10 states raided the St. Louis headquarters of Wachovia Securities
looking for smoking guns. Massachusetts already found a bunch with UBS and is
going after UBS for fraud.
some of the more progressive issuers, like Nuveen, are redeeming their auction
rate preferreds ARPS, albeit slowly. Some already have completely. I'm down
to $3.3 million.
went on CNBC yesterday afternoon to tell the issuers who hadn't redeemed that,
if they didn't redeemed at par in full, we'd be running full-page ads in the
Wall Street Journal headlined "Why You Never, Ever Should Do Business With
unintended economic consequences: From today's
New York Times:
of Grain Rises, Catfish Farms Dry Up
Catfish farmers across the South, unable to cope with the soaring cost
of corn and soybean feed, are draining their ponds.
a dead business, said John Dillard, who pioneered the commercial farming
of catfish in the late 1960s. Last year Dillard & Company raised 11 million
fish. Next year it will raise none. People can eat imported fish, Mr. Dillard
said, just as they use imported oil.
As for his 55
employees? Those jobs are gone.
Corn and soybeans
have nearly tripled in price in the last two years, for many reasons: harvest
shortfalls, increasing demand by the Asian middle class, government mandates
for corn to produce ethanol and, most recently, the flooding in the Midwest.
This is creating
a bonanza for corn and soybean farmers but is wreaking havoc on consumers,
who are seeing price spikes in the grocery store and in restaurants. Hog and
chicken producers as well as cattle ranchers, all of whom depend on grain
for feed, are being severely squeezed.
has the rise in crop prices caused more convulsions than in the Mississippi
Delta, the hub of the nations catfish industry. This is a hard-luck,
poverty-plagued region, and raising catfish in artificial ponds was one of
the few mainstays.
Then the economics
went awry. Feed is now more than half the total cost of raising catfish, compared
with a third of the cost of beef and pork production, according to a Mississippi
State analysis. That makes catfish more vulnerable. But if the commodities
continue to rocket up and some analysts believe they will other
industries will fall victim as well.
the president of Dillard & Company, calculates that for every dollar
the company spends raising its fish, it gets back only 75 cents when
they go to market.
happening to this industry is sad, but being sentimental wont pay the
light bill, Mr. King said. ...
Lyme Disease is devastating. I know people
with Lyme Disease for 10 years. It's ruined their life. You can get chronic
Lyme Disease with one bite. 40% of the bites are stealth. They don't produce
the telltale bullseye rash. Since the ticks are so small, you may never know
what hit you. Lyme is one of the fastest-spreading infectious diseases in the
United States, according to the Centers for Disease Control and Prevention,
with roughly 23,300 new cases reported in 2005, up 22% from 2001.
I have seen Lyme's
devastating effects. I am obsessed with not getting it. Because the disease
is so new, little is known about it and myths abound. Two key myths:
1. If you remove
the tick within 12 hours, you're safe. The tick does not have to be engorged
(i.e. stay a long time) for the spirochetes to get into your system. As the
tick sucks your blood in, he exchanges it for his saliva - and that's where
the Lyme bacteria are. Remove ticks instantly.
2. One month
of antibiotics will kill the Lyme spirochetes. Longer is better. According
to one friend, "The problem is, if you find a tick on you, the chances
of it passing the Lyme bacteria to your bloodstream is high -- and the ONLY
way to stop Lyme spirochetes from your blood to your organs, brain, nerves,
joints (the "white" areas of your body) is to kill the bacteria while
they are still floating around in your bloodstream. The damage done from two
months of antibiotics is NOTHING compared to the downward spiral you can take
if you let the buggers get beyond your blood. Trust me. I've been fighting Lyme
spirochetes for 8 years now."
High grass and
the woods are for viewing, but not visiting. I look at pretty woods and pretty
gardens and think "War Zone. Stay Out."
has first research center in the world to focus on chronic health problems associated
with Lyme disease. For the latest, read "Rash Judgment?"
from the Columbia
Want a gun business? A friend calls. He's checked 1,500 businesses
in the past six months. The best he's found is an antique gun distributorship
with earnings of $400,000 a year, which the owner only wants $750,000. It's
a nice all-credit card business, no consumers as customers, just dealers. There
are two lessons. First, it's worthwhile contacting business brokers asking about
businesses for sale. You'll get lots of education. In today's economy you might
find some very cheap businesses. Second, you'll need to ask hard questions,
like why is he selling so cheaply? And what (if anything) do you know about
the business he's selling? My friend knows guns. Which brings me to my latest
fantasy purchase, an AK-47.
Apparently AK-47s are easy to buy in the U.S. $300 will get you a good used
one. The magazine holds 50 rounds. Each round costs 50 cents. You can only shoot
one bullet at a time, since the automatic mechanism has to be disabled for U.S.
sale. The AK-47 is not as accurate as the U.S. equivalent, which is called the
AR-15 but it's cheaper.
This is the AR-15, which costs around $600. It's more accurate than the AK-47.
Gun gurus predict
booming sales this year as buyers fear what disasters the Democrats might prevail
on the industry if the Democrats win the White House. I'm not investing in the
gun business, nor do I want a collection of guns.
Sister Mary Ann, who worked for a home health agency, was out making
her rounds visiting homebound patients when she ran out of gas. As luck would
have it, an Exxon Gasoline station was just a block away.
She walked to
the station to borrow a gas can and buy some gas. The attendant told her that
the only gas can he owned had been loaned out, but she could wait until it was
returned. Since Sister Mary Ann was on the way to see a patient, she decided
not to wait and walked back to her car.
She looked for
something in her car that she could fill with gas and spotted the bedpan she
was taking to the patient. Always resourceful, Sister Mary Ann carried the bedpan
to the station, filled it with gasoline, and carried the full bedpan back to
As she was pouring
the gas into her tank, two Baptists watched from across the street. One of them
turned to the other and said, 'If it starts, I'm turning Catholic.'
outsourced call center
I was depressed last night so I called Lifeline.
Got a call center
in Pakistan . I told them I was suicidal.
They got all excited
and asked if I could drive a truck?
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
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