Technology Investor 

Harry Newton's In Search of The Perfect Investment Technology Investor. Harry Newton

Previous Columns
9:00 AM EST, Thursday, May 28, 2009. Life moves in wonderful ways. Three years ago, Michael, my son, was on his way to becoming a zillionaire. He had graduated Dartmouth and had joined a private equity firm in New York City. The firm was so happy with him, they gave him "carry" -- also called a piece of the action. Michael was 25, an unprecedented age to earn "carry."

Then Daddy (that's me) stuck his big nose in and suggested it was time for Michael to go to business school. Michael wasn't interested. He was buying and selling companies. He was doing deals like there was no tomorrow. He was rich. He was seeing the world (four trips to India in 12 months). What could he learn he didn't already know?

He humored the old man, boned up on the GMATs, applied to all the right schools and waited. He figured no one would want him. He was wrong. He got into Harvard and Dartmouth's Tuck School of Business.

"Go to Harvard," said Daddy. He accepted Harvard, to start in September 2007. That was to please the old man. He made no plans to go. In April 2007 Harvard organized a get-together for incoming members of the class of 2009. Fortunately Michael had nothing to do that weekend -- especially after Daddy offered to pay for the trip to Boston. Michael will go anywhere if someone else foots the bill.

He came back from the weekend bubbling, indeed frothing, with enthusiasm for "all the super-intelligent, super-talented, super-accomplished kids. They're so diverse. From everywhere."

He burbled on for so long, I smelled a rat. "What's her name?" I asked. Her name was Anne. She was a member of his class. It was drop-dead love at first sight. They've been together ever since. During school times, they'd sit for hours next to each other dissecting the same case.

She'd show him how to analyze the numbers. She's an Excel whiz. He taught her to be vegetarian. (Not much of a bargain for her. She's good sport.) During off-school times they visited her parents in Belgium, bummed beaches in Thailand and hung out in Cambodia, Singapore, England, Ireland and Mexico.

They're both graduating next Thursday. All the families are trekking to Boston for Graduation.

Last night we heard that Michael had been made a Harvard Business School Baker Scholar. That's an honor given to the top 5% of the graduating class. It's a serious honor. It's like being made a knight of realm. From now on, Michael will always be known as Baker Scholar Michael Newton.

Thank you, Anne.

The private equity fund? It's still around. But some minor things happened in the last couple of years -- sub-prime mortgages, the financial collapse and the Great Recession. It was not a good time to be in private equity. It was a good time to be at business school. It was a good time to meet Anne.

His happy, proud father is crying his eyes out as he writes these words.

After graduation next week, Michael and Anne are off to Portland, Oregon to pursue an entrepeneurial dream. Starting your own business is a good idea since jobs are not plentiful for fresh graduates of Harvard Business School.

When God closes a door, She opens a window.

To borrow more, again? Is that our salvation? There are two ways for a government to revive a dead economy: Pump money into it. Build bridges and roads. Second, drop interest rates, businesses will borrow, build factories and employ people. Personally, I don't think you can encourage businesses to borrow if basic business opportunities are lacking -- like we're in a recession and demand is falling. What happens with ultra-low interest rates is that the government encourages yet another investment bubble. People eye their savings paying nothing. People start to take risks they shouldn't -- like buying houses and goods they can't afford and investing in stocks on margin. All the stuff that put us in the mess we are today.

Sometimes, financal markets wake up and say "What the government is doing isn't working." Bloomberg led off their stories this morning with:

May 28 (Bloomberg) -- European and Japanese government bonds fell, after Treasuries had their biggest rout in four months yesterday, on concern central bank efforts to revive the global economy by driving down borrowing costs are failing.

Bonds are down. Stocks are down, and maybe on their summer skid, maybe back to testing the March 6 low.

So where to invest? This is from Richard Russell of Dow Theory Letters.

May 27, 2009 -- Do you remember when I said a month ago that "everything's all right as long as the bond market says it's all right." Well, today the bonds said that everything's NOT all right. The long bond plunged today to yield 4.56% and the 10-year note sank to yield 3.58%. Not good, not good at all. Remember, mortgage rates are set off the 10-year note yield.

I'm going to start today's site in an unusual way. I'm going to start it with something somebody else wrote, a most interesting article below from The Daily Telegraph.

Gold is glittering more than ever.
All the fundamentals are in place for a big run in gold.

The "hot money" has found a new friend: gold and gold stocks.

As we looked at a few days ago, the big money pension and mutual funds are betting big on gold too.

The thing is though, despite all of the attention gold is getting, 95% of investors will miss the biggest prize of all. Here's why.

Gold is "Cool" Again

A few days ago the world learned that a leading hedge funds manager, John Paulson, has started to place some very big bets on gold too.

Paulson has become one of the most closely followed hedge fund managers - and justifiably so. He personally pocketed more than $3 billion and made his clients a whole lot more by betting against subprime loans while the housing bubble burst.

So when Paulson makes a move, the entire financial world watches. This time, although he's betting big on "boring" gold and gold stocks, was no different. The blogosphere and financial media lit up when Paulson's firm disclosed how much gold and gold stocks it had bought.

Paulson's firm said it had $2.8 billion in SPDR Gold Trust (NYSE:GLD ($94.15) and $638 million in Market Vectors Gold Miners ETF (NYSE:GDX). It also had taken 2.6%, 4.4%, and 11.3% stakes in gold mining companies Goldfields (NYSE:GFI), Kinross Gold (NYSE:KGC), and Anglogold Ashanti (NYSE:AU) respectively.

With such a big bet, Paulson is almost single-handedly making gold "cool" on Wall Street. And gold stocks have been steadily climbing over the past month.

Good Things Come to Those Who Wait
No one can deny Paulson's success. He spots an opportunity, gets a big leveraged position, waits for it all to unfold, and makes a fortune for himself and his clients in the process.

We all see the opportunity in gold though. Everything is there. We have the pending devaluation of the dollar. We have a very small gold market relative to the investment capital sitting on the sidelines. We have China quietly announcing it is going to buy a lot more gold (China said it was going to up its gold holdings to 3% of foreign exchange reserves from 1.6% - no timeline given).
It's all there. And now Paulson is betting big too.

This run seems inevitable at this point. There is, however, one very big consideration a lot of folks following Paulson's lead are forgetting. And that's time.

You see, Paulson is good - really good. But a lot of investors are good at finding opportunities. The difference with Paulson is he's patient and disciplined enough to maximize an opportunity. Just take a look at his bet against the subprime lending market.

According to Pensions & Investments magazine, "Convinced that subprime mortgages would falter, [Paulson] did extensive research, hired staff with necessary expertise and in April 2005 began making a big bet, using credit default swaps to short the asset class."
Think about that for a second. Paulson began betting against subprime mortgages in 2005. That was well before the housing market peaked and nearly two years before subprime markets started to falter in 2007.

He was right, but he was early. He stuck to his bet even though the housing market continued to do well. Eventually, it paid off.

Hot or Not?

How many investors do you know that are willing to wait two years or more for gold stocks to really pay off?
Two years is a very long time for Wall Street. And, when it comes to gold, there will be many "tests of will" (read: sharp corrections) which will sort out a lot of the weak hands.

First, the inflation/deflation battle is far from over. The deflationary forces of a credit contraction are incredibly strong. The Fed is printing a lot of money very quickly, but we haven't seen much of an impact yet. Consumer prices ( CPIS 213.24 ?0.00%) still have barely nudged. Most of the run-up in gold and other real assets has come from expectationsof future inflation.

Second, we've watched how the "hot money" hedge funds and traders don't stick to a thesis for very long. Although the theses are completely justified, we have watched the average lifespan of a thesis decline to about two months.

For example, in the last six months sectors have fallen in and out of favor very quickly. Infrastructure stocks were very hot as the stimulus bill was being formed. The excitement hasn't lasted. The for-profit education sector had a big run too. It didn't last long though as expectations quickly exceeded reality. The entire sector quickly started to decline even though companies were releasing stellar quarterly results. Now we're seeing the "fix-it-yourself" thesis which ran auto parts store stocks to lofty highs come to a slow and painful end as well.

The theses just don't last very long. And when stocks in the sector quit making new highs every week the "hot money" sells out and moves on. The dominant gold thesis will likely run its normal course in the short-term as well.

Finally, it's going to take a long while (I'm expecting a few years) for the gold story to play out completely. The economy is still in a tough spot. Investors are still more than willing to lend to the U.S. government. Every element of an inflationary firestorm is in place, but there haven't been any sparks yet. Gold looks great, but it's just attracting a bit too much attention at the moment for me.

The Price of Impatience
That's why I'm not running in to "Buy gold NOW before it's too late!!!"

Right now, gold is the hot sector. Expectations are soaring and it is only a matter of time until the "hot money" finds something new. Gold is glittering now and it will do so in the future, but it's best to buy it when it's not being watched so closely.

Yes, I've bought gold and gold stocks in the past. I will be buying gold stocks again in the future. It's all part of my personal investment plan which I'm sticking too.
Inflation is coming. Real assets and shares of producers of real assets will do exceptionally well in the years ahead. For now though, it's best to look for value in the real asset sectors.

The recent run-up in gold stocks has made many other real assets look downright cheap. There is much better value in other real asset sectors.
For instance, silver stocks haven't kept up at all with gold's recent rise. Oil has done well, but it could do much, much better than gold in the short-term if the economy does show some signs of life over the summer. Probably best of all though, is the opportunity shaping up in agriculture.

In the end, gold is good. If you don't have any exposure, get some. If you do, just let the rally play out and stick to your plan. Chances are, this time isn't "the big one" for gold, the rally will fizzle out, and there will be another long dry spell where gold is no longer very "cool."
In the end, Paulson didn't get to where he is by running with the herd. He got it by identifying an opportunity, consistently buying into it, and then waiting for the big payday. That's something we can all take away.

Andrew Mickey
Chief Investment Strategist, Q1 Publishing

I can't emphasize strongly enough the concept of time. I've written before that time is maybe the most important ally you can have in investing. Why? Because if you have enough time, I can almost guarantee that you'll be rich -- over time. Actually, all trading is an exercise in BEATING TIME. Here's why. You can buy tax-free muni bonds from your state. You can compound the interest on those bonds.

If you have enough time, your investment will climb into the millions of dollars. Or you can even buy a few very safe dividend-paying stocks like Proctor or Johnson and Johnson and compound the dividends over time (and yes, even if you pay the taxes on the dividends), and if you do this long enough you will end up with millions, more money than you know what to do with.

And all you need in the two examples above is TIME. But most of us don't have enough time or enough patience to compound our original investments into the millions of dollars. So we trade, buy one stock, sell it and buy another. We trade and hope our trading will make us rich, but it's all in an effort to beat the sure thing -- compounding through time.

Many of my subscribers own gold or gold items. How long will we hold them? That's where patience comes in -- and time. Warren Buffett understands time. He made his billions by taking intelligent positions in various stocks and then compounding by adding new companies. Warren understands time as few other investors do.

Time is our best friend in investing. But all fiat currencies ultimately fail over time. Why do they fail? Because paper or fiat currencies don't have to be mined like gold. They can be created at will by a central bank. At some point, politicians succumb to the temptations to over-produce fiat currencies, and in that process these currencies are systematically destroyed. The dollar is in the overproduction process now, which is why the dollar is doomed. It's simply a matter of time and pressure from ignorant and impatient politicians.

Gold is at the cross-roads. Below we see a daily chart of gold. I have marked the level of resistance at the 960 level (the horizontal blue line). RSI is in the overbought zone above 70, but MACD (lower red arrow) is in its bullish mode. The red arrow points to the "golden crossroads" where the rising blue 50-day moving average crossed above the rising red 200-day moving average. You might say gold is at the "crossroads." The bullish breakout would come if gold can close decisively above 960.

To BlackBerry or to iPhone? Susan checked her email at the ballet last night. Like every BlackBerry owner she's concerned she may have missed something in the last 15 seconds. She got a BlackBerry Curve.

It has one feature I like -- a loud ringer. I can finally hear a BlackBerry ring. Yikes, they listened.

BlackBerry or iPhone? It's all about typing. Do you need a keyboard or can you tap on a screen? If you can go either way, then the iPhone is for you. It's a much better phone and the third-party apps (oveer 25,000) blow BlackBerry's miserable collection away.

If you must have a keyboard, then know the Curve comes in many models. All have a camera. Some have GPS. Some have Wi-Fi. The iPhone doesn't make you choose. It's got all that built in, and more.

Darling little camera. It arrived yesterday, my new Canon D10 waterproof, drop-proof, child-proof camera.

Everything about it lives up to its billing. Great photos. Standard excellent Canon software. Tiny. Only 7.7 ounces. Fits in your pocket. My favorite quote from the instruction book:

"If the camera is dirty... wash it completely with fresh water. ... After using this camera at the beach, it is recommended you soak the camera in fresh water for a few hours to completely remove any salt deposits."

I've had cameras since I was 18. I've never been told to wash one.

French Tennis Open 2009 TV Schedule -- US broadcast times

Thursday, May 28
5:00 am - 12:00 PM: French Open Early Rounds - TENNIS CHANNEL (HD) - LIVE
12:00 PM - 6:30 PM: French Open Early Rounds - ESPN2 + ESPN2 HD - LIVE and tape
6:30 PM - 5:00 AM: French Open “Tonight” show - TENNIS CHANNEL (HD) - tape

Friday, May 29
5:00 am - 12:00 PM: French Open Early Rounds - TENNIS CHANNEL (HD) - LIVE
12:00 PM -6:30 PM: French Open Early Rounds - ESPN2 + ESPN2 HD - LIVE and tape
6:30 PM - 5:00 AM: French Open “Tonight” show - TENNIS CHANNEL (HD) - tape

Saturday, May 30
5:00 am - 1:30 PM: French Open Early Rounds - TENNIS CHANNEL (HD) - LIVE
1:30 PM - 4:30 PM: French Open Early Rounds - NBC - LIVE
4:30 PM - 5:00 AM: French Open “Tonight” show - TENNIS CHANNEL (HD) - tape

Sunday, May 31
5:00 am - 3:00 PM: French Open Early Rounds - TENNIS CHANNEL (HD) - LIVE
3:00 PM - 6:00 PM: French Open Early Rounds - NBC - tape
6:00 PM - 5:00 AM: French Open “Tonight” show - TENNIS CHANNEL (HD) - tape

Monday, June 1 - RD. of 16
5:00 am - 12:00 PM: French Open Round of 16 - TENNIS CHANNEL (HD) - LIVE
12:00 PM - 6:30 PM: French Open Round of 16 - ESPN2 + ESPN2 HD - LIVE and tape
6:30 PM - 5:00 AM: French Open “Tonight” show - TENNIS CHANNEL (HD) - tape

Tuesday, June 2 - QUARTERS
8:00 am - 12:00 PM: French Open Quarterfinals - TENNIS CHANNEL (HD) - LIVE
12:00 PM - 6:30 PM: French Open Quarterfinals - ESPN2 + ESPN2 HD - LIVE and tape
6:30 PM - 5:00 AM: French Open “Tonight” show - TENNIS CHANNEL (HD) - tape

Wednesday, June 3 - QUARTERS
8:00 am - 12:00 PM: French Open Quarterfinals - TENNIS CHANNEL (HD) - LIVE
12:00 PM - 6:30 PM: French Open Men’s Quarterfinals - ESPN2 + ESPN2 HD - LIVE and tape
6:30 PM - 5:00 AM: French Open “Tonight” show - TENNIS CHANNEL (HD) - tape

Thursday, June 4 - SEMIS
5:00 am - 8:00 AM: French Open Men’s Doubles Semifinals - TENNIS CHANNEL (HD) - LIVE
8:00 am - 1:00 PM: French Open Women’s Semifinals - ESPN2 + ESPN2 HD - LIVE
1:00 PM - 6:30 PM: French Open Women’s Semifinals - TENNIS CHANNEL (HD) - tape
6:30 PM - 5:00 AM: French Open “Tonight” show - TENNIS CHANNEL (HD) - tape

Friday, June 5: - SEMIS
5:00 am - 10:00 AM: French Open Women’s Semifinals - TENNIS CHANNEL (HD) - tape
10:00 am - 1:00 PM: French Open Men’s Semifinals - NBC - LIVE
4:00 PM - 11:00 PM: French Open Men’s Semifinals - TENNIS CHANNEL (HD) - tape
11:00 PM - 6:00 AM: French Open Men’s Semifinals - TENNIS CHANNEL (HD) - tape

Saturday, June 6: - FINAL
9:00 am - 12:00 PM: Women’s FINAL - NBC - LIVE

Sunday, June 7: FINAL
9:00 am - 2:00 PM: Men’s FINAL - NBC - LIVE

Technology at its best
Police in Radnor, Pennsylvania, interrogated a suspect by placing a metal colander on his head and connecting it with wires to a photocopy machine.

The message "He's lying" was placed in the copier. The police pressed the Copy button each time they hought the suspect wasn't telling the truth.

Believing the "lie detector" was working, the suspect confessed.

Proud Mothers
Three mothers are sitting on a park bench in Miami Beach talking about (what else?) how much their sons love them.

Sadie says, "You know the Chagall painting hanging in my living room? My son, Arnold, bought that for me for my 75th birthday. What a good boy he is, and how much he loves his mother."

Minnie says, "You call that love? You know the Eldorado Cadillac I just got for Mother's Day? That's from my son Bernie. What a doll."

Shirley says, "That's nothing. You know my son Stanley? He's in analysis with a psychoanalyst on Park Avenue, no less. Five sessions a week- $200 an hour, and what does he talk about? Me!"

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, click here and here.