Technology Investor 

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

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9:00 AM EST, Monday, November 10, 2008: The first myth to be shattered was "Diversification works." The second one to go is that there are investments that are counter-cyclical -- when one goes up, the other goes down. Hence, on balance you gain. This year's downturn has shattered these myths for most of us, but especially our colleges which had this theory that they had a hugely long timeframe and could afford long-term, illiquid investments. This weekend Barrons did a cover piece on them and the problems colleges are facing called Crash Course.

As the economy has worsened and asset values have plummeted, the question for all of us becomes, "What are we really worth? How do we report our diminished worth to our family and our faculty and alumnae? I wrestled with this question over the weekend, since I also have investments in hedge funds, private equity funds, leveraged buyout funds and real estate syndications. These things have dropped dramatically in value in recent months -- but no one can tell me, with any degree of certainty, what they're worth. There are two reasons for lack of certainty -- there are no "comparables" (i.e. no sales) and the bids on these things -- what people are prepared to pay today are few and ultra-low. The answer I hear is "We'll know in five years."

In the old days colleges used to be in stocks and in bonds. You could figure their value by checking the Wall Street Journal's daily columns. Simple. End of story. Then, reflecting the philosophy of Yale's, David Swensen, its influential endowment director of the past 23 years, colleges diversified into stuff that theoretically was more profitable.

Yale now has 70% of its endowment invested in three categories: hedge funds, private equity and "real" assets, including timber, real estate and oil- and-gas properties -- one of the most aggressive allocations among major endowments. Princeton similarly has 70% in hedge funds, private equity and real assets, while Harvard has 57% in those groups.

The worst thing about all these illiquid investments is you can't apply our inviolate 15% Stop Loss Rule -- which has saved our tushy so many times when the market turns against us. When it turns against you in these non stockmarket-traded things, you can do basically nothing, except lick your wounds, agonize, and listen to the baleful stories of your managers.

Looking forward: For me cash remains king, as I mull my next move. For Fred Hickey, bearish author of The High-Tech Strategist newsletter, he thinks gold will regain its shine, as the dollar "resumes its long-running decline." He's long Newmont Mining, Agnico-Eagle Mines, Goldcorp and Yamana Gold. He's out of puts, for now and is actually long EMC, Microsoft, SAP and Adobe Systems. As to upcoming purchases of puts, he's looking at Amazon and Research in Motion.

What plans do consumers have for their spending?

Obama's victory speech and transcript. In case you or your kids missed it, Click here. It's worth listening to, no matter who you voted for.

Perfect logic.
A cowboy rides his horse up to a saloon.

All the patrons gawked as the cowboy kissed his horse on the butt before coming in and asking for a drink.

The bartender serves him and asks, "Mind if I ask why'd ya kiss your horse on the butt?"

The cowboy says, "It's 'cause I got chapped lips."

The bartender asks, "Does manure help them heal?"

Cowboy replies, "No, but it keeps me from licking them."

Be wary of the advice you give
A man who smelled like a distillery flopped down on a subway seat next to a priest. The man's tie was stained, his face was plastered with red lipstick, and a half-empty bottle of gin was sticking out of his torn coat pocket.

He opened his newspaper and began reading. After a few minutes, the disheveled guy turned to the priest and asked, "Say, Father, what causes arthritis?"

"Mister, it's caused by loose living, being with cheap women, too much alcohol and a contempt for your fellow man!"

"Well, I'll be damned!" the drunk muttered, returning to his paper.

The priest, thinking about what he had said, nudged the man and apologized. "I'm very sorry, I shouldn't have been so unpleasant about it. Tell me, how long have you had arthritis?"

"I don't have it, Father -- I was just reading here that the Pope does!"

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.