Technology Investor 

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

Previous Columns
8:30 AM EST, Thursday, November 1, 2007: The Fed dropped interest rates. This pleased investors. But it hurt the dollar. And will continue to hurt the dollar. Which currency is popular, where money flows, is determined by what that traveling money can earn. Right now money can earn more abroad. Hence foreign governments prefer currencies like the Euro, the pound sterling (and even the Aussie dollar) all of which are now at peak). A cheap dollar is benefiting U.S. exports, but not the dollar. It is wise to have some of your assets abroad. The Fed Reserve has two goals:

1. Ensure the stability of the banking system.

2. Keep inflation at bay.

It only cares about the dollar and oil insofar as both can impact inflation. This is what the Fed said yesterday:

The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/2 percent.

Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time.

Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

The Committee judges that, after this action, the upside risks to inflation roughly balance the downside risks to growth. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Where oil is headed (much higher): From my energy guru Jim Kingsdale:

With all sorts of dummies speculating on why oil prices are setting new records, here is a link to a piece I just posted with the best information that I have seen published on the underlying supply/demand fundamentals. It is an interview with Chris Skrebowski, an independent analyst who closely tracks the actual production schedules for all major oil fields in place and underdevelopment. Chris is commenting about a recently released landmark German study of peak oil and how those insights compare with his own.

Excerpts from that interview:

The rather stark message that came from this, was that oil production has probably peaked now, and will decline steadily from here on out at about 3% a year, which then means that we have, looking forward, some pretty dramatic declines. If you think that in 2006, crude and liquid production was about 81 million barrels a day, what the report is projecting is that it will fall to about 58 by 2020. Now this contrasts with the IEA's hope that it'll be at 105 at that point. So that's a spectacular difference; even more spectacular by 2030 when the IEA was hoping the world would be fueled with 116 million barrels a day, the report sees the production down to 39 million barrels a day. It's therefore not difficult to see the sort of economic stresses and strains that this will produce in the world economy.

For the full interview, click here.

The easiest way to play oil: There are two ETFs:

1. OIL. "The Fund seeks to replicate the performance of the Goldman Sachs Crude Oil Total Return Index. The Fund reflects excess returns potentially available through unleveraged investments in the contracts comprising the Index, plus Treasury Bill interest possibly earned on funds committed to the trading."

2. United States Oil Trust. (USO). "The Fund seeks to reflect the performance of the spot price of West Texas Intermediate light, sweet crude oil delivered to Cushing, Oklahoma by investing in a mix of Oil Futures Contracts and Other Oil Interests."

These are weekly charts.

Investing in Turkey: It's new and burgeoning. The wild west with opportunities (and risk) everywhere. Istanbul (as I mentioned) is now Europe's largest city. Turkey only opened itself to foreign investment in 2001. It's now among the most liberal, with a free currency, the Lira. There is property to buy. (That's what I looked at.) But I can't find (at least yet) a fund that holds Turkish shares. This piece sums up what's happening. The war with the Kurdish rebels is a downer.

Oct. 29 (Bloomberg) -- No prime minister in Turkey's modern history has done more to turn the lira into the strong man of the foreign exchange market than Recep Tayyip Erdogan. Traders now bet his threat to invade northern Iraq will turn it into a laggard.

The currency has fallen 0.6 percent since Oct. 9, when Erdogan told the military to prepare to strike bases of the Kurdistan Workers' Party. The order ended the biggest rally in Turkey's lira since before the 1970s, breaking the momentum that made it the best performer this year among 26 emerging markets tracked by Bloomberg. Trading in options shows the lira is now the riskiest currency over the next two months.

The lira's 19 percent appreciation this year to a record 1.18 versus the dollar reflects Erdogan's success in attracting investors and tourists to Turkey, America's stalwart Islamic ally. The economy more than doubled since he was elected in 2003, and the benchmark ISE National 100 Index of stocks has risen five-fold. Now, traders are growing concerned because more than 80,000 troops are poised near the Iraq border, prepared to hunt down Kurdish militants after an Oct. 21 firefight killed more than 35 people. ...

"I can see the lira taking quite a beating'' if the conflict escalates, said Lars Christensen, senior emerging- markets analyst in Copenhagen at Danske Bank A/S, Denmark's biggest lender. The lira will weaken to 1.28 per dollar by year- end, according to the median of 23 forecasts from economists and strategists compiled by Bloomberg. ...

Traders love the lira because of Turkey's 16.75 percent benchmark interest rate. The currency is used for so-called carry trades, where investors buy assets in countries with high yields financed with loans in low-yielding currencies such as the yen. The Bank of Japan's base rate is 0.5 percent.

"I would continue to see sell-offs prompted by politics as an opportunity to buy,'' said Caroline Gorman, a fund manager at August Asset Managers Ltd., which oversees $9 billion of assets in London. ``It would take a lot for me to stop believing in the lira as a carry play.''

Investors who sold U.S. dollars to buy lira in carry trades earned 20 percent in the past six months, Bloomberg data show. The return for those who sold Japanese yen to buy lira was more than 17 percent.

The Kurdish PKK, designated a terrorist organization by the U.S. and the European Union, has fought a two-decade war for independence from Turkey at a cost of almost 40,000 lives. ...

A gain for the lira against the dollar this year would be the first since the government changed the denominations on Turkish currency notes in 2005, converting old lira into new at a rate of 1 million to one. The decision was a key to improving the economy, Erdogan said.

When the inflation rate rose above 100 percent in the 1990s, ``we used to have citizens in Turkey who carried U.S. dollars in their pockets and people who would go to exchange houses to convert their salaries,'' Erdogan said. ``Now those exchange houses are almost out of business.''

During the July election campaign, Erdogan, the leader of the Islamic-leaning Justice and Development Party, reminded voters how 21 straight quarters of growth had pushed per capita gross domestic product to $5,500 a year and promised to increase that to $10,000 in a second five-year term.

Foreign direct investment in Turkey surged to almost $20 billion last year, double the amount in 2005 and 20 times the annual average in the decade before Erdogan came to power.... Inflation fell to a 37-year low of 6.9 percent in July from a peak of 150 percent in 1995. The budget deficit is 0.7 percent of gross domestic product, lower than that of Germany and France.

The arrogance of James Cayne: From today's Wall Street Journal:

A crisis at Bear Stearns Cos. this summer came to a head in July. Two Bear hedge funds were hemorrhaging value. Investors were clamoring to get their money back. Lenders to the funds were demanding more collateral. Eventually, both funds collapsed.

During 10 critical days of this crisis -- one of the worst in the securities firm's 84-year history -- Bear's chief executive wasn't near his Wall Street office. James Cayne was playing in a bridge tournament in Nashville, Tenn., without a cellphone or an email device.

This email is a total scam: They're phishing (that's the technical term) for my information, like my credit card number, my social security number, etc. Once they have all that information, they go on a spending spree. I received a similar one from PayPal. Don't bother answering emails like this one.

Brood awakening: I don't make this stuff up. I can't.

Shehadeh Abu Arar with some of his 67 kids in village of Burgata.

JERUSALEM - He has eight wives, 67 children and two more on the way. And Shehadeh Abu Arar says he couldn't be happier. The Israeli Arab farmer and camel breeder boasts of knowing all his little ones by name and brushes off questions about his unusual lifestyle. "I am happy I have kids, this is what God gave us," said Abu Arar, 58. "This is what He wants, and I do what He tells me."

Abu Arar has more children than any man in Israel. He first married in 1967 and had 31 children from his first two wives. His eldest son is 37 and his youngest child is less than 1. So far, he has 20 grandchildren. All of them live with him in an extended family compound in the village of Burgata, where he shuttles from one lovely to another.

"Every night I decide which wife to go to," Abu Arar recently told the Yedioth Ahronoth newspaper. His youngest wife is only 23, a Palestinian from the Jenin refugee camp in the West Bank.

Abu Arar is not stopping there - eight wives, apparently, is not enough. "Now I am thinking about a new wife, No. 9, and I am already preparing for the marriage," he said. "There are many women who wish to marry me." Under Israeli law, Bedouins like Abu Arar may take as many wives as they like without being considered polygamist.

The best Halloween story.
A couple was invited to a swanky Halloween costume Party. She got a terrible headache and told her husband to go to the party alone. He being a devoted husband protested, but she argued and said she was going to take some aspirin and go to bed, and there was no need of his good time being spoiled by not going.

So he took his costume and away he went. The wife, after sleeping soundly for about an hour, awakened without pain and, as it was still early, decided to go the party.

Since her husband did not know what her costume was, she thought she would have some fun by watching her husband to see how he acted when she was not with him.

She joined the party and soon spotted her husband cavorting around on the dance floor, dancing with every nice chick he could, and copping a little feel here and a little kiss there. His wife sidled up to him and being a rather seductive babe herself, he left his current partner high and dry and devoted his time to the new babe that had just arrived. She let him go as far as he wished , naturally, since he was her husband. Finally, he whispered a little proposition in her ear and she agreed, so off they went to one of the cars and made mad passionate love. Just before unmasking at midnight, she slipped away, went home, put the costume away and got into bed, wondering what kind of explanation he would make for his behavior.

She was sitting up reading when he came in, and she asked what kind of a time he had. He said: "- Oh, the same old thing. You know I never have a good time when you're not there."

"Did you dance much?"

"I'll tell you, I never even danced one dance. When I got there, I met Pete, Bill Brown and some other guys, so we went into the den and played poker all evening. But you're not going to believe what happened to the guy I loaned my costume to......."

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.