Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
9:00 AM EST, Tuesday, March 3, 2009. This
is getting more serious by the day. What's "serious" is not
the sharp and continuing drop in the stockmarket but the desperation in commercial
real estate. I sat in on a conference call yesterday. An owner of big downtown
office buildings reported to his dismayed investors that
His buildings have fallen 30% to 50% in value in the past several months,
and were continuing to fall. The falls have wiped out their equity in the
buildings, where were typically financed to 75%.
He had really no idea what the buildings were now worth, since there were
no "comparables." They'd been no sales in recent months against
which he could compare his buildings to.
Rents are falling. Tenants were leaving in droves. Many buildings are now
cash negative. This means their rental income doesn't cover their expenses
of upkeep and interest. The owner now is dumping his own money into the buildings.
Either the lender renegotiates his loan or the borrower walks. The equity
owners are, of course, wiped out.
Few companies are signing for new space for two reasons. First, they are concerned
about their business prospects. Second, all believe that rents will fall even
Refinancing of loans coming due is hell -- since most lenders are like deer,
stuck in the headlights of an oncoming car. Lehmann Brothers' bankruptcy hadn't
helped since they were big in commercial real estate.
me. Check out the IYR -- the iShares Dow Jones US Real Estate ETF:
not helping is that respected newsletters -- like the Dow
Theory Letter written by Richard Russell -- are getting really gloomy:
March 2, 2009
-- "It is becoming clearer each week the life we have known has been
changed forever. No longer can many afford to dine at fancy restaurants,
buy designer clothes, make payments on a new Porsche or purchase a McMansion.
We have enjoyed the longest period of leveraged prosperity in history."
to believe our retirement would be financed by profits in the stock market.
We took out home equity loans to pay for vacations. We sent the kids to
college by strapping them with loans requiring years to pay back. We measured
wealth by the limit on our credit cards. Now, the dream of perpetual prosperity
has ended." - From old-timer Bill Gary who's been writing the terrific
Price Perceptions commodity advisory for 41 years (800 231 0477).
I think about the market maybe 20 hours a day (I sleep the other four hours,
but I guess I even dream about the markets). Anyway, here's something that
I came up with that shocked me. Let's take the bottom of the Great Depression
when the Dow collapsed in July 1932 to 41 (it's never been lower than that
since). Then let's take the Dow high in October 2007 at 14164. What's the
halfway level of the entire climb from Dow 41 to Dow 14164? That halfway
level is 7082. OK, Well, last Friday the Dow closed at 7062, 20 points BELOW
7082, the halfway level of that prodigious climb.
this mean? This means that as of last Friday the Dow has given back slightly
more than half of all its gains since the bottom of the Great Depression.
Think of that -- it shows us what horrendous damage has been done to the
market since 2007. No wonder Warren Buffet's Berkshire Hathaway has lost
half its value, so far, in this brutal bear market! Now Buffett tells us
that the US economy will be "in shambles" for the rest of 2009.
else. In yesterday's New York Times there's a whole page of opinions by
leading analysts regarding where each analyst sees the ultimate bottom of
this bear market. This is an exercise in futility. One of the biggest mistakes
one can make in investing is placing a limit to where you think a bull or
a bear market will end.
fact is that nobody, no brilliant analyst, has any idea of where this bear
market will end. What if earnings and dividends collapse, and price/earnings
sink below 6 (it's happened before)? Under those circumstances, the Dow
could sink as low as 1000 or even lower. We know that bear markets, following
great bull markets, tend to overrun themselves on the downside. Therefore,
my own advice (to you and myself) is that we should have no preconceived
notions as to where this bear market will end.
How bad can
it get? I honestly don't know. A lot of seasoned investors are congratulating
themselves on being smart enough to be largely in cash over the last year.
But wait -- suppose the US dollar collapses along with most fiat money?
In that case, nobody will want to hold Federal Reserve Notes. Nobody will
want any fiat money backed by any country (remember, all fiat money must
be backed by the country of issue).
too much of everything. From an email I received yesterday,
golf course market is way overbuilt. There are approximately 300 golf courses
for sale in the US. Of those 100 + are tied to housing development projects.
Bernie Madoff says his wife should be allowed to keep nearly $70 million worth
of assets held in her name, including the Manhattan penthouse where Mr. Madoff
is under house arrest, because they are unrelated to his alleged fraud.
to the $7 million penthouse on Manhattan's Upper East Side, Ruth Madoff holds
some $45 million in municipal bonds at Cohmad Securities Corp., a brokerage
firm partially owned by Bernard L. Madoff. She also holds $17 million at Wachovia
stupider and stupider. GM owns Saab. GM is trying to sell Saab.
Saab is broke and in the Swedish version
of Chapter 11. Saab Managing Director Jan Ake Jonsson, says Saab needs 500
million euros (about $632 million ) in aid from the Swedish government to
survive. Mr. Jonsson played down the possibility of tieing his company up
with Sweden-based Volvo, which Ford Motor Co. is looking to sell. "There
is too much overlap" between the brands, he said.
has shocked the industry by begging the Japanese government for money.
I don't make
this stuff up.
simplest, best GPS around: I love my Garmin
Nuvi 350. But I always thought you had to run it with an attached power cord
that dangled annoyingly. Wrong! The thing has an internal battery and will
run for hours stuck on the windshield, like this...
and like this.
You can also
carry it with you and use it to find your way while you're walking. Recomended.
Refurbished for only $114 at Amazon
or new for $302 from Amazon.
new mile high club. I remember when it took
25 minutes to fax a single sheet. Now it's 2009 and I'm sitting on a plane
and surfing the Internet at high speed. The service is provided by a new company
At 35,000 feet, you turn on your laptop's
wireless WiFi. It finds gogo. You turn on your browser, put $12.95 on your
credit card and bingo you're receiving emails, checking your falling stock
prices, shopping for things you can't afford, reading gloom and doom news
on Bloomberg.com, or even this column.
I asked a stewardess
what happens when passengers surf porn sites (YouPorn, RedTube, etc.).
She told me,
"I tell them to shut off surfing pornographic sites on the plane."
And they reply?
They get angry,
Morris died. His will provided $500,000 for an elaborate funeral.
As the last
attendees left, Morris's wife Rose turned to her oldest friend Sadie and said,
"Well, I'm sure Morris would be pleased."
you're right," replied Sadie, who leaned in close to her friend and lowered
her voice to a whisper. "Tell me, how much did it really cost?"
it," said Rose. "Five hundred thousand."
Sadie exclaimed. "I mean, it was very nice, but really... $500,000?"
"The funeral was $6,500. I donated $500 to the synagogue for the Rabbi's
services. The shiva food and drinks were another $500. The rest went for the
quickly. "$492,500 for a memorial stone? Oy vey, how big is it?"
a half carats."
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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