Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Tuesday, May 24, 2005: And
you thought there was a real estate bubble in your area. You ain't seen nothing
yet. As Exhibit 1, I give you this photograph.
As Exhibit 2, I give you this article from Monday's New York Times:
and Stunt Men? Must Be a Miami Condo Project
By ABBY GOODNOUGH
MIAMI, May 22
- In the last month alone, you could salsa with dancers in fringed hot pants
at Aqua, hear a drag queen D.J. at Cynergi or watch stunt men ricochet off
a trampoline at Soleil. Nightclubs?
No. Carnival acts? Not quite.
These were launch
parties for condominium projects, one of the stranger forms of nightlife in
a city obsessed with real estate. Alcohol and music were abundant, but so
were sales agents and brochures with statements like, "It is the impeccable
aesthetic of textures and calming shades - limestone and blue marble - that
further distinguish these voluminous spaces."
developers, forced to be ever more creative in the pursuit of buyers for condos
still years from being built, pay for these lavish affairs - another take
on the "froth" in the housing market that Alan Greenspan, the Federal
Reserve chairman, described last week. Though the parties emulate the club
scene, most take place in hastily erected sales centers or parking lots near
the future construction site. Guests encounter model kitchens and scan price
lists while sampling mojitos and tuna tartare.
needs to one-up each other more and more with these things," said Jorge
Luis Garcia, a real estate agent attending a party for Vitri, an unbuilt project
in South Beach where prices start above $600,000. "The food's got to
be better, the lighting's got to be better, the D.J.'s got to be really good.
The new norm is the quarter-million-dollar party."
No expense is
spared because the stakes are high: about 70,000 condo units are planned,
under construction or newly finished in Miami proper, home to fewer than 400,000
people. Builders need early deposits to get construction loans, so they work
hard to entice the buyers they covet - image-conscious people, many from Latin
America and Europe, with money to burn on a second home, a speculative investment
or a status symbol.
The bait includes
small initial down payments, slick marketing - and parties. Usually held just
before a project begins selling units, the events are meant to create buzz
among brokers, who make up the bulk of invitees and bring clients and hip,
attractive friends. Live with us, the parties say, and ooze wealth, sex, fitness
who owns two condos in South Beach and is looking to buy more, said launch
parties were beginning to rival clubs.
look at the women here," Mr. Graney said at the party for Vitri, a smallish
project with about 70 units next to a busy overpass on Biscayne Bay. He gazed
around the sales office courtyard. "Look at all these pretty women."
He added, however,
that he would probably not buy at Vitri because the building was too low.
"If I spend six hundred grand," he said, "I want to go high."
While the Vitri
party whispered "gallery opening," with waiters padding about and
artwork on display, the one for Paramount Bay, a much larger project in Miami,
screamed "movie premiere." Guests walked a red carpet, mingled among
models at martini bars made of ice and watched Star Jones of "The View"
interview the architect, sales director and other luminaries of the project.
The models and Ms. Jones were paid to attend.
To stir up fresh
interest in a project called Aqua, Craig Robins, the developer, held a party
so sprawling that arriving guests got maps with their promotional packets.
Aqua's 105 condo units sold out this month, but 46 town homes, which start
at $2.65 million, have been a tougher sell.
The theme was
"A Day in the Life of Aqua." Dancers in fringed shorts coaxed some
guests to salsa to a 10-piece band while other guests hovered around giant
pans of paella and ropa vieja. A lounge singer belted out "Respect"
in a model living room while chefs whipped up crepes in the model kitchen.
Near a newly planted mango grove, guests drank mango caipirinhas and gazed
at the Intracoastal Waterway.
of New York City gushed as she showed other party guests the view from a penthouse
unit she bought with her husband. "I think of this as Park Avenue or
the Champs-Élysées," Ms. Davis said, "except you've
got water in the middle of it."
were overheard sounding less impressed: "A
million eight? You've got to be kidding me." "Marble
countertops are kind of over."
Across the bay
in Miami, where developers are snatching up land in scruffy neighborhoods
being reinvented as arts districts, the parties have a funkier vibe. Cynergi
held a launch party in April with a drag queen D.J., macaroni and cheese,
inflatable lounge chairs and a blank canvas for guests to paint on.
Soleil, a "sports-inspired"
project in Wynwood, a gritty neighborhood just north of downtown, gave a party
at its sales center last week with trampoline artists, karate demonstrations,
masseuses, an aura reader, an oxygen bar and sales agents in tracksuits, with
towels slung on their shoulders. Rita Gambardella, a real estate agent, brought
her sister, Paula, and their friend Debra Carlson, visitors from Seattle who
could not stop snapping photos. Both said they were thinking of buying at
Soleil, a 43-story building with prices starting near $400,000.
come here probably four times a year and rent it out the rest of the year,"
said Ms. Gambardella, in a red dress and cowboy hat.
I'd retire here," Ms. Carlson chimed in.
a financial adviser who said he has bought and sold about 20 condos and houses
here over the last three years, was crunching numbers as he watched the trampoline
bet you 70 percent of the people buying here are investors," Mr. Aue
said, "so 70 percent of the units will be for sale again by the time
this thing opens."
too much supply for this kind of building, such a high-end thing," he
said of the overall market.
Still, Mr. Aue
said he did not regret attending the Soleil party, one of many that he checks
out these days. "Maybe I meet someone who tells me about a project that's
coming up that I like better," he said, "or a new mortgage guy."
Or maybe he
just soaks up another evening of real estate mania. As the light faded and
dessert trays were passed, two men bounded through the crowd in antigravity
boots, an update on pogo sticks. Guests drifted toward the valet parking line,
cans of Red Bull (a sponsor) in hand, nose tubes from the oxygen bar draped
around their necks.
of the track-suited sales agents echoed: "Sales start June 6."
As Exhibit 3,
I bring the latest issue of Fortune Magazine:
Its long ten-page cover story begins "They snap up real estate, flip
it, then chase the next hot market. Theyre the new day traders
and theyre dancing on the edge of a volcano." Before you read
the entire, frenzied article -- click
here -- remember two facts: First, the author, Grainger David lives
in a rented New York City apartment. Second, he owns no real estate. Nothing.
He personally thinks the bubble is a BUBBLE. And he believed in his bubble theory
before he researched and wrote the story.
now officially sucks. K7 is better: For years, CallWave
gave me a free fax line. It grabbed my faxes, converted them to a PDF and emailed
them to me. Much easier for me, especially when traveling. Then CallWave charged
$3.95 a month. I went along. Recently, they raised the price to $7.95, which
is too high. Bye, bye CallWave (CALL). You have a new competitor. It's called
K7. Everyone can now sign up for a free fax number -- Click
here. One final point: Send yourself a fax. When it comes in, fish it out
of your junk/spam email box and tell your email software that K7 is an OK sender.
By the way, K7 is perfect for overseas readers who want a cheap (i.e. free)
U.S. fax number.
I have a dear friend at CallWave, David Hofstatter, who's president and CEO.
I have emailed and called him about the new ridiculous higher charges. I even
offered to pay him $3.95 a month for the fax line (without the voice stuff he
throws). He hasn't responded. You'd think he'd be more responsive, given his
company's recent miserable share performance:
Why are executives SO stupid?
Why Wall Street often sucks:
1: Headline: Goldman Leaves Buyers With Losses in Winning No. 1 in U.S. IPOs
May 23 (Bloomberg)
-- Goldman Sachs Group Inc., the world's most profitable securities firm,
is the No. 1 underwriter of U.S. initial public offerings at the expense of
investors who have lost money in eight of the firm's ten IPOs this year.
Shares of Goldman-led
IPOs, including Lazard Ltd.'s $855 million sale, fell an average 10.8 percent
in 2005. By contrast, initial offerings managed by Morgan Stanley, Goldman's
closest competitor, rose almost 4 percent. Lazard, the investment bank headed
by Bruce Wasserstein, is down 15 percent since it started trading on May 4.
Goldman, which gets almost 25 percent of its investment banking revenue from
share offerings, earned about $120 million from arranging U.S. IPOs so far
this year, data compiled by Bloomberg show. The buyers of these stocks, meantime,
are nursing losses of as much as 30 percent.
has turned its back on the `buy side' and chosen to do deals in a way that
benefits their investment-banking clients,'' said Ben Holmes, an IPO specialist
at Boulder, Colorado-based Protege Funds LLC.
58, chairman of Goldman's equity capital markets group, and David Solomon,
43, who oversees equity underwriting, declined to comment. Goldman, led by
59-year-old Chief Executive Officer Henry Paulson, ranked as the top arranger
of U.S. IPOs in three of the past six years.
not have had the success in our equities business without taking into consideration
the interests of both our buy side clients and issuing clients,'' said Goldman
spokesman Peter Rose in an interview.
include billionaire Edgar Bronfman, whose Warner Music Group Corp. went public
at $17 on May 11. While Warner Music has since dropped 5.3 percent, Goldman
and New York- based Morgan Stanley shared underwriting fees of $26.3 million
with 13 other securities firms.
percent of all of this year's IPOs in the U.S. -- 45 of 85 -- are trading
below their offering price, Bloomberg data show. That compares with 42
percent in the same period last year, when companies raised $10.2 billion.
This year, U.S. IPOs have attracted $12.9 billion.
in underperforming IPOs occurred as the Standard & Poor's 500 Index fell
1.9 percent since the end of December, after rising 26 percent in 2003 and
9 percent in 2004.
a market downturn, you get lots of deals priced below the price range,'' said
Jay Ritter, a finance professor at the University of Florida in Gainesville,
who has analyzed the performance of IPOs for the past 14 years.
managed by Goldman rewarded investors in the past. Goldman offerings rose
41 percent on average in their first three years of trading, according to
data tracked by Ritter from 1990 to 2003. The returns exceeded IPOs managed
by Morgan Stanley, Merrill Lynch & Co. and Credit Suisse First Boston.
All the firms are based in New York.
This year, Goldman
is responsible for marketing the worst- performing group of IPOs in the U.S.
among the five busiest underwriters, according to Bloomberg data.
U.S. IPOs this year are Prestige Brands Holdings Inc., the Irvington, New
York-based maker of consumer products such as Comet soap and Murine eye drops,
up 5.8 percent since Feb. 10; and American Reprographics Co., a Glendale,
California-based software maker, up 13.9 percent since Feb. 4.
Goldman IPO has been Tampa, Florida- based Syniverse Holdings Inc., which
sells technology to wireless phone companies. The stock is down 30.6 percent
since the Feb. 10 IPO.
unsettled time for IPOs,'' said Elizabeth Newberry, managing director at New
York-based Carret & Co. that manages about $1 billion and hasn't bought
shares of an IPO this year. ``I would think twice before I would become an
was the most profitable of the world's biggest securities firms in the first
quarter, with net income of $1.51 billion in the first fiscal quarter, compared
with $1.47 billion at Morgan Stanley and $1.21 billion at Merrill Lynch. ...
a chart of Goldman's U.S. IPOs in 2005 and how they have fared:
Item 2: Superfund:
Remember my unkind words on that piece of dog doo-doo. Here's an email I received
this morning from reader Dieter Tegrovsky.
Let me come in from the cold
. I enjoy reading your daily column for
quite some time, it always gives me interesting things to think over
for which I would like to thank you
please find below an article from
the Austrian quality paper Die Presse of today, providing some
interesting information about the performance of Mr. Baha´s Superfunds
as I assume that your command of the German language apart from heavy discussions
with Mercedes might not the most fluent one, let me give you some explanations:
in short, it
is stating that following the degrading of GM and Ford bonds, the so-called
Superfunds lost feathers heavily fund C from beginning of 2005 until
May 17 a total of 28.6 %, fund B 23.2 %.... in April alone Superfund
Global Consolidated Trust lost 15.93 %, Superfund C Eur Sicav lost
22.16 %, compared to CSFB Tremont Hedge Fund Index which lost in April
only 1.04 %....
Mr. Baha was
not available to comment on the bad performance of his funds
Herbe Verluste für Superfund
(Die Presse) 24.05.2005
Von GM und Ford offenbar am falschen Fuß erwischt.
Wien (dom/bloomberg). Als Folge der Herabstufung der großen US-Autofirmen
General Motors und Ford mussten die Hedge-Fonds der heimischen Superfund-Gruppe
(ehemals Quadriga) kräftig Federn lassen. Der Quadriga Superfund C verlor
von Anfang 2005 bis zum 17. Mai laut Superfund-Website 28,6 Prozent, der Superfund
B 23,2 Prozent.
Die Fonds der
Superfund-Gruppe sind sogenannte Trendfolger (CTAs). Diese gelten nach Experteneinschätzung
als riskanteste Strategie in der Welt der Hedge-Fonds, wurden aber in Österreich
auch von vielen Privatpersonen gekauft. In guten Jahren schneiden derartige
Managed Futures oft deutlich besser ab als Konkurrenzprodukte. Vor allem,
wenn es auf den Finanz- oder Rohstoffmärkten keine ersichtlichen Trends
gibt oder es zu plötzlichen Trendbrüchen kommt, kommt es bei den
Trendfolgern zu Rückschlägen (Drawdowns).
Schon 2004 war
kein gutes Jahr für die Trendfolger, heuer ging es weiter bergab. Die
Entwicklung des Ölpreises hat viele Fondsmanager ebenso am falschen Fuß
erwischt wie zuletzt die Reduktion der Bonitätsbewertung der US-Autokonzerne
GM und Ford, deren Anleihen von der Ratingagentur S & P auf Junk-(Schrott)-Niveau
herabgestuft worden war.
Allein im April
verlor der Superfund Global Consolidated Trust 15,93 Prozent, der Superfund
C Eur Sicav 22,16 Prozent. Zum Vergleich: Der CSFB Tremont Hedge Fund Index
verlor im April nur 1,04 Prozent.
Gründer und Chef der Superfund-Gruppe, war für eine Stellungnahme
zur schlechten Performance der Fonds nicht zu erreichen. Im aktuellen Newsletter
auf der Superfund-Website stimmt er die Anleger aber schon darauf ein. Da
heißt es wörtlich: "Futures Fonds ermöglichen hohe zweistellige
Renditen - dafür muss man auch zeitweise Verluste in Kauf nehmen."
Die längste Drawdown-Phase bei Futures Fonds habe ganze 28 Monate angedauert.
to be an equity angel Part 2: Yesterday's quiz: You're an angel.
You invest in start-ups. You receive one with a new idea. No competitors. Easy
technology. Some patent coverage. A couple of prototypes built. The following
estimated financials. Would you do it? Send me an email with your reactions.
Cost of Goods Sold
Growth-- year to year
readers were skeptical of the revenue projections. And so they should be. There
are very few companies that can grow this fast. Even if they could, they'd need
massive repeated injections of cash. Reader Jay Liebowitz asks, "Why
does the gross margin fall to 50% in a market with no competition and easy technology?
It should be in the 70% range." He's right.
He also asks "How do you go from a couple of prototypes to a factory that
produces that much that fast?" He also asks questions about customers and
how many have tried the prototypes? What did they say about them?
All of us are venture capitalists. People come to us with startups they want
funded. Saying Yes is easy. Saying No is less easy, but do-able. Checking the
idea out is not easy or quick. Before we put money into this investment we'd
want to check out the management, the customers, the technology, the distribution
methods, the marketing, the finance, etc. Weeks of work. Time you could be playing
So, this one? Is it worth the time? My quick take: Projections are way too optimistic.
Money to be raised is too little ($1.5 million). Go play tennis.
Getting into Heaven:
Henry was a hard working man who provided for his family his whole life.
found himself at the gates of Heaven, standing before the Angel of the Lord.
the angel, "What must I do to enter such a beautiful place?"
replied, "You must spell love."
" Well that's easy... L-O-V-E".
said, "Very good Henry. You may enter. But before you do, please guard
the gate so that I can run a quick errand."
After an hour Henry's wife appeared at the gates. She had died having missed
Henry so much.
"Oh Henry I've missed you so. What must I do to join you in such a beautiful
" Hello honey. To enter, all you have to do is spell Czechoslovakia."
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. That money
will help pay Claire's law school tuition. Read more about Google AdSense,
here and here.