Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
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).
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
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."
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
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:
You can buy 14-watt
compact fluorescents for $2.29 a piece. These bulbs give off the light of a 60-watt
incandescent. For more, click
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.
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
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
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
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:
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
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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