Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
9:00 AM EST, Monday, March 30, 2009.
Last Monday I reported that a hummingbird had built her nest just outside
our rented house in La Quinta, California. This is the mother sitting on her
two tiny white eggs.
Over the weekend,
the eggs hatched and last night, there were two, new baby hummingbirds.
Though I haven't
seen the mother recently, she must be around since the neighborhood is suddenly
swimming in hummingbird droppings. Our hummingbirds have become our mantra
for "Life goes on," despite today's 5% drop
in Asian stockmarkets.
looks bleak. Todd emails me. "Futures getting wacked---Dow down 170.
S&P down 18. Nasdaq down 23. Europe down 1% to 2% Oil down $1.50+. End
of stockmarket rally."
Of course, Blind
Freddie could have predicted today. On Friday, yours truly wrote, "No
one knows if this rally (up 21% since early March) is the beginning of a bull
market or another bear trap. I'm thinking it has some legs and deserves a
little of your monies." Fortunately, I didn't take my own dumb advice
on Friday and instead played tennis.
today's mess on the firing of GM Rick Wagoner, a singularly unimpressive man.
As Wikipedia wrote this morning, "During Wagoner's tenure as CEO of
GM, the market capitalization of GM has gone down by more than 90%."
He joined GM in 1961 as an analyst in the treasurer's office and hasn't worked
Obama's "Save The Banks" plan work? One
of my favorite financial reporters, James Surowiecki wrote the following in
this week's New Yorker:
long ago, many of American's biggest banks made terrible bets on overpriced
real estate and suffered huge losses. While the banks insisted that they
were fundamentally healthy, economists and politicians declare many of them
to be insolvent. Government regulators, though, allowed the banks to stay
in business. The banks hunkered down and cut back sharply on new lending
the resulting credit crunch made an already weak economy worse.
sounds like the story of what just happened to to the U.S. economy, but
actually it's the story of what happened at the beginning of the nineteen
eighties, after banks found themselves sitting on billions of worthless
loans to Sun Belt developers and other commercial builders. And, if you
tweak the details a bit, it's also the story of what happened in the early
eighties; at that time, it was loans to developing countries that got the
banks in trouble. In other words, while the current banking crisis is exceptionally
severe, it's not exactly new. It's the third major banking crisis in the
past thirty years, which is at least a couple of crises too many. And that's
forcing the Obama Administration to confront two huge tasks at once: rescuing
the economy from the current meltdown, and figuring how to prevent the next
rescue effort, surprisingly, may be the easier of those tasks; though recurrent
financial turmoil is hardly a confidence-booster, the fact that the U.S.
economy -- unlike say Japan's -- has recovered well from previous banking
disasters offers hope that the government's strategy will work. ...
crisis is, to be sure far bigger. But so, too, has been the government's
response, including a plethora of new initiatives -- the stimulus package,
the mortgage-relief program, the Geithner plan -- and unprecedented activity
by the Fed, which has been buying up commercial paper, intervening in the
securities market and purchasing Treasury bonds with the goal of driving
down loan rates. ...
danger of this approach is that it may fail, forcing us to take over the
banks after all. There's another danger, though: that it will succeed. The
U.S. financial system is fundamentally unhealthy, too big and volatile for
anyone's good. ... We've been like people living on a floodplain who during
the deluge talk about moving or making the levees higher, but end up rebuilding
in the same sport. But it should be possible to insure that when bankers
go careering off the road they don't take the rest us with them. ...
solving the current crisis, (the government) is partnering with Wall Street,
using the existing system to try to stabilize the economy. But in thinking
about about the future, it's trying to use hostility to Wall Street to bring
out serious changes to the system. This is quite a balancing act; Let's
hope the Administration can pull it off.
full article is in the April 6, 2009 issue of the New Yorker. Click here.
Funds Weekly commentary: It includes:
of the past few weeks has cleared the prior oversold condition and the market
is now overbought in a generally negative Climate. As should be clear from
last year's decline, the market can be severely oversold and only become
more oversold, so an oversold condition is not a timing tool. That said,
oversold conditions in clearly favorable Market Climates are often followed
by strong advances, and overbought conditions in clearly unfavorable Market
Climates are often followed by spectacular declines. At the recent market
low, the Market Climate could certainly not be characterized as favorable,
but at the present overbought level, there is considerable risk of a fresh
the recent advance has been focused on low-quality and distressed sectors
such as financials, insurance and homebuilders. If the current advance is
durable, we would expect to observe stronger market internals, greater participation
among higher quality sectors, and a clear easing of credit spreads, which
remain near their highs despite the advance in equities. On sufficient improvement
in market internals, we would be inclined to establish call option positions
that would gradually take us to a significantly less hedged position on
persistent market strength, but we do not expect to eliminate our put option
defenses until the combination of valuations and market action becomes clearly
favorable, or until it is reasonable to expect a sustained economic recovery
within a quarter or two. Nothing in our analysis of valuations, market action,
or economic conditions compels us that removing downside protection is reasonable
the Market Climate last week was characterized by unfavorable yield levels
and relatively neutral yield pressures. The yields on Treasury Inflation
Protected Securities have declined further in recent sessions, with inflation-adjusted
yields on some issues dropping below 1%. I expect that a further decline
in real yields would prompt us to reduce our holdings modestly, as it is
doubtful that persistent inflation surprises will be a near-term outcome.
I continue to view the U.S. dollar as vulnerable to depreciation given the
rapid expansion in government liabilities, so the Strategic Total Return
Fund continues to hold about 20% of assets in precious metals shares and
foreign currencies, with a few percent in utility shares on the basis of
longer-term total return prospects.
the full commentary, click here.
Minutes freaked out on malware last night. It
talked about a piece of software that wends its way into your computer and
can do mean and horrible things over time. The main interviewee was a man
from Symantec anti-virus software. Of course, the threat is real. And of course,
Symantec has an interest is freaking everyone out. There are four things you
can (and should) do:
Keep your anti-virus software up to date.
Don't open email attachments.
Don't visit dubious web sites. When in doubt, stay away.
Don't freak out. If your PC does get infected, you'll want to replace its
hard disk with a clean clone you made and the backups of your daily work.
And then reformat the infected drive.
Civil Heretic. The cover story on this weekend's
New York Times Magazine profiled the eminent physicist Freeman Dyson, who
has a different take on global warming -- different from Al Gore. Read the
Palin is a hoot. Sort of. You need to read
the cover story "Pipe Dreams" in this month's issue of
Portfolio magazine. Excerpt:
To read the full
At the start
(of her governorship), everybody loved Sarah. Even the states largest
newspaper, the Anchorage Daily News, which shed denounced as a yellow
liberal rag, hailed her as the Joan of Arc of Alaskan politics.
Few noticed that her political skills were not matched by an interest in,
or grasp of, policy. Or that her concept of truth was, shall we say, rather
to her are like Silly Putty, said Larry Persily, former deputy commissioner
of Alaskas Department of Revenue, who later worked for Palin in the
states office in Washington. She shapes them into whatever people
want to hear.
wanted to hear as Palin assumed office at the start of 2007what theyd
been wanting to hear, in fact, ever since the Exxon Valdez oil spill in
1989was that Big Oil, especially Exxon Mobil, was evil. Looking back
over their 40-year partnership with the oil multinationals, most Alaskans
concluded that no matter how many tens of billions of dollars in revenue
the state had received as a result of North Slope production, it should
have gotten more. And it would have, according to popular sentiment, if
the greedy, crafty, amoral, conniving, duplicitous, and nefarious oil companies
hadnt robbed Alaska blindin many cases, with the illicitly bought-and-paid-for
cooperation of the states elected and appointed officials.
Michael visited us for a couple of days. He
brought his school work. You can see it at his feet. That's his mother doing
bad is the economy?
+CEOs are now playing miniature golf.
+ Even people
who have nothing to do with the Obama administration aren't paying their taxes.
+ Obama met
with small businesses (GE, Pfizer and Citigroup) to discuss the Stimulus Package.
+ PETA new serves
chicken wings at their meetings.
+ People in
Beverly Hills have fired their nannies and learned their children's names.
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,
here and here.