Previous Columns
8:30 AM EST Monday, May 22, 2006: "Sell in May and go away." Come back in October. That's the old rule. Some analysts believe U.S. stockmarkets will fall 10%-plus between now and October. Since 1945, the S&P 500 has fallen an average of 4.3% during the second and third quarters of years with mid-term elections (i.e. this year).

The BIG fear now is that the Fed will raise rates to clobber inflation, but put the economy into recession. Writes The Wall Street Journal online this morning:

Mr. Bernanke's own calculations are fraught with the kinds of uncertainties markets around the world have about what he will do. Predecessor Alan Greenspan faced similar conundrums three times in his 18-year tenure as chairman, in 1989-90, 1994-95 and 1999-2000. "In each case, he stopped raising rates before inflation peaked. Two episodes resulted in recession, one in a growth slowdown; in each, inflation ultimately ended lower than it began." ... As it happens, Mr. Bernanke studied and wrote about the history of this phenomenon in 1995 with monetary economist Mark Gertler. They "found that economic growth begins to slow roughly six months after the Fed tightens monetary policy. "But inflation doesn't begin to ease until about year has passed."

 In short, what the Fed does is critical. Its next meeting won't be until June 28-29. And given the uncertainty between now and then, we could be in for some seriously rocky times. Indicative is what happened in India this morning. The Mumbai Stock Exchange's Sensitive index dropped 10%, triggering a halt in trading. The government then stepped in and promised banks it would help investors caught by cash calls, as Bloomberg reported, and that seemed to encourage the buying of what then seemed like undervalued stocks. In midafternoon trading, the index was off just 3.6%. Before the market opened today, the index was already off 14% this month, and The Wall Street Journal Asia reports Indian investors were worried rising inflation in the U.S. would prompt increases in interest rates both there and in India. Trouble was already brewing earlier in the day, with East Asian stock markets falling to a seven-week low as a slump in commodity prices hurt petroleum and mining stocks.

To sum up:
1. Inflation is no longer the prime concern. It's recession.
2. What the Fed does is critical.
3. The Fed won't do anything for another six weeks.
4. Those six weeks will have much uncertainty, much anxiety and much anxiousness.
All this suggests that going short with selected stocks short-term would make profitable sense. Which ones? Since I figured this entire "logic" out early this morning, I didn't have time to pick the best shorts. Here are a couple of possibles:

As a pure gamble, Qwest shines: Richard C. Notebaert, Qwest's talented chief executive, did an interview with The New York Times on Saturday. Part of the interview:

Q. You said on your most recent earnings call that Qwest had turned a corner. What corner?

A. We don't talk about turning the corner because I don't think you ever do. But we had a number of milestones. For example, revenue in 2002 was declining at nearly 8 percent and now we're positive. We've had negative cash flow. Last year we did $904 million of cash flow adjusted and this year we'll do $450 million to $600 million more. Then getting all that litigation with the government squared away. And now, to hit profitability, without any adjustments, that feels very good to everybody.

Q. Might you be more of an acquisition target?

A. If I looked at it as a consultant or an adviser, I would look at Qwest today and say most of the things that made me uncomfortable before are gone. Again, the government — at every level we're O.K. The debt load's down, profitability's up. Everything's squared away and there's no threat of bankruptcy, which you might have thought about a few years ago. And the company has solid performance characteristics. And it's throwing off good cash. It's profitable. And it's got a wonderful group of employees. So I don't think we're unattractive.

Read that again: "So I don't think we're unattractive." Sounds like he's shopping the company.

The impact of being "green." From a Starbucks ad in Sunday's New York Times:

If everyone who received this newspaper today switched one lightbulb in their house to a compact fluorescent light, it would be like eliminating the emissions of approximately 89,000 cars for one year. Find out what you can at www.GlobalGreen.org.

Putting the metal to the pedal. Inside the front wheel of this otherwise normal bicycle is a 1HP two-stroke engine. It will get power you to 20 MPH and get up to 200 mpg. You buy the wheel and the paraphernalia (controls and gas tank) and install it on your existing bike. Cost $400. Sadly, it won't be available until next year. For more, click here.

The Revopower $400 motorized wheel.

How do I get better cell phone reception? All handheld cellphones (i.e. the one you have) are only 0.6 of a watt. But you are allowed to go to 3 watts, i.e. five times as powerful. This means your conversations will be clearer and you can be further away from your local cell tower. You boost your signal with the:

You can put it in your car or your RV. You can use it at your house. You don't want to carry it with you. You'll need to have a place on your cellphone to connect to. Most (but not BlackBerrys) have a place. I have not tested this thing. But it's been favorably reviewed in the trade press. It seems a great idea for a distant or country house, especially one where landlines are unavailable or unreliable (like mine). Click here.

What we learned from the avian flu scare about stock fads: Play them short-term. Don't stay in for longer than the scare continues. On first sign of weakness, get out. And fast. I love this cartoon:

Brilliant "Logic"
After having dug to a depth of 1,000 meters last year, Korean scientists found traces of copper wire dating back 1,500 years and came to the conclusion that their ancestors had a telephone network all those centuries ago.

Not to be outdone. Chinese scientists dug to a depth of 2,000 meters and shortly after headlines in Chinese newspapers read: "Chinese archeologists have found traces of 3,000-year-old fiber-optic cable and have concluded that their ancestors had an advanced high-tech digital communications network a thousand years earlier than the Koreans."

One week later, Portuguese newspapers reported the following: "After digging as deep as 3,000 meters in a Lisbon marketplace, scientists had found absolutely nothing. They therefore concluded that 4,500 years ago, the Portuguese were already using wireless technology."

Harry Newton

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. Thus I cannot endorse any, though some look mighty 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 Claire's law school tuition. Read more about Google AdSense, click here and here.
Go back.