Harry Newton's In Search of The Perfect Investment
9:00 AM EST,
Tuesday, November 18, 2008: The worst part of this is the uncertainty
and unpredictability, and the helplessness they bring. Helplessness turns into
inaction. And inaction turns into cash -- which today is the U.S. dollar. I
don't see the persuasive bargains out there -- though many do. They spend their
lives catching falling knives.
vast unwashed are not opening their brokerage statements. They should. They
should assess what they have, what their stocks' prospects are. They should
get rid of the broken companies, hold the rest. They should even consider buying
more of the stocks they love.
believe that generally stock prices will fall more. But there are good
companies out there selling cheaply. If this sounds contradictory, it depends
whose shoes you're wearning.
I don't see the recovery taking hold, yet. The banks aren't yet selling their
foreclosed commercial properties at bargain prices. They're too busy begging
for money in Washington or firing people. Citibank is firing an amazing 50,000
employees. Those fifty thousand terminations tell you what Citi's management
thinks of the future for banking. More profitable to fire people than to lend
money. So much for the TARP.
Nouriel Roubini writes:
news about October retail sales (-2.8% relative to the previous month and
now down in real terms for five months in a row) confirm what this forum (RGE
Monitor) has been arguing for a while, i.e. that the U.S. has entered its
most severe consumer-led recession in decades. At this rate of free fall in
consumption, real GDP growth could be a whopping 5% negative or even worse
in Q4 of 2008. And this is not a temporary phenomenon as almost all of the
fundamentals driving consumption are heading south on a persistent and structural
basis. Consider the many severe negative factors affecting consumption. One
can count at least 20 separate or complementary causes that will sharply reduce
consumption in the next several years:
Pick a bunch of
retailers and short them. It's not too late. Someone sent me a list of retail
store closures. The list was two pages long. The stores are empty.
Charges Mark Cuban With Insider Trading: The first rule of breaking
the law is not to get caught. The second rule is to have no witnesses, especially
those who will be pissed at you because you took advantage of them, or because
they think you did. The third rule is to keep your mouth shut.
I suspect Cuban is not guilty of insider trading. He might profitably eye the
Martha Stewart case. Martha didn't go to jail because of insider trading. She
went because she lied to a Federal official, which is a crime. According to
my man, who knows this stuff, she should have just told them, "Yeah, I
got a call from my broker telling me Sam (Waksal) was selling and I should sell,
so I sold. Go F+*k off." She'd have been in the clear. Lying is dumb.
My friend writes, "I don't know much about Cuban except he's rich as hell,
probably something of a lowlife, and has a bad temper. I don't see the fiduciary
relationship, I don't see the control, I don't see the duty owed to the company.
The SEC wants us to believe that if you know something the market doesn't know,
it doesn't matter how you acquired that data, you aren't allowed to use it.
I don't think they've ever succeeded in that line of attack, which is why they
never brought securities charges against Stewart."
You be the judge.
Here's bits of today's Wall Street Journal piece:
a Foul on NBA's Cuban, Alleges Insider Trades in Web Firm
and Exchange Commission filed civil insider-trading charges against Mark Cuban,
saying the Dallas Mavericks owner dumped his stake in an Internet company
just after he heard confidentially that the company was about to issue low-priced
Mr. Cuban, known
for his tirades against National Basketball Association referees, quickly
fired back at the securities cops, saying their claims were false, and that
they had a "facts be damned" attitude.
It was the latest
and most serious trouble for the flamboyant 50-year-old investor and sports
entrepreneur, who has run up nearly $2 million in NBA fines. He once criticized
the NBA executive in charge of referees as being so incompetent he couldn't
manage a Dairy Queen. To placate offended Dairy Queen personnel, he subsequently
spent a day at the fast-food chain, dishing out soft-serve ice cream.
In the SEC complaint
against him, a witness described how Mr. Cuban allegedly flew off the handle
in June 2004 when he was told about a proposed private offering in Mamma.com,
an Internet company in which he had taken a roughly 6% stake earlier that
year. Such an offering was likely to trigger a decline in the stock's price.
According to the complaint, Mamma.com's chief executive emailed Mr. Cuban
asking him to call as soon as possible. Mr. Cuban called four minutes later
from the arena where the Mavericks play. "Well, now I'm screwed,"
Mr. Cuban reportedly said.
By the next
day he had sold his entire stake -- just before Mamma.com shares started plunging,
the complaint says.
Clark, a lawyer for Mr. Cuban, said, "We're shocked. We find it incredible
that given all the important issues that the SEC has to address with regard
to today's economy they've sought to bring a $750,000 case relating to a he-said,
she-said about one trade against a person whose integrity has never been questioned
before with regard to the securities markets."
Guy Faure, Mamma.com's
CEO at the time, couldn't be reached for comment. Mr. Faure, who wasn't named
in the complaint, left Mamma.com in 2007. Later that year, the company was
Mr. Cuban made
billions of dollars in 1999 by selling an Internet company to Yahoo Inc. at
the height of the dot-com boom, and remains drawn to the dot-com world. He
wrote on his blog last summer: "Is there anything more fun than sitting
around, growing your hair, drinking a Bud while listening to Jethro Tull and
pondering how to change the balance of power in the search world and unseat
He also has a longstanding interest in exposing the shadowy world of small-company
stocks and alleged chicanery by minor-league stock operators. Last year, he
a Web site that seeks to expose wrongdoing in that world. In a controversial
move, Mr. Cuban discloses on the site that he may short-sell the shares of
companies that he knows the site is about to discuss, seeking to profit from
the expected decline in their shares.
in the case is why the SEC waited more than four years to file charges related
to the 2004 share sale. Mr. Cuban had written about the sale of his Mamma.com
stock as early as 2005 on his blog. The SEC said, however, that it didn't
start pursuing the case until 2007. It isn't unusual for such investigations
to last a year or two. ...
involvement with Mamma.com began when he bought 600,000 shares in the company,
a 6.3% stake, in March 2004. According to the SEC complaint, in the spring
of 2004, the company decided to raise money through an offering known as private
investment in public equity, or PIPE. It says Mamma.com's CEO called Mr. Cuban
on June 28, 2004, to gauge his interest in taking part.
The SEC said
the CEO began the call by telling Mr. Cuban that he would have to keep the
information confidential. That's typical in such offerings. But lawyers for
Mr. Cuban said he was never given the proviso about confidentiality, and signed
no confidentiality agreement.
An email sent
shortly after the call seems to back the SEC's contention. According to the
complaint, the executive chairman emailed a recap of the CEO conversation
with Mr. Cuban to board members, and wrote: "As anticipated he initially
'flew off the handle,' and said he would sell his shares (recognizing that
he was not able to do anything until we announce the equity) but then asked
to see the terms and conditions."
and the next morning, June 29, Mr. Cuban sold his full stake at about $13
a share. That evening, at 6 p.m., Mamma.com announced the PIPE financing.
The following day, June 30, Mamma.com shares opened 9% lower than the prior
day's close and continued to fall.
In a blog post
on March 2, 2005, Mr. Cuban recalled the events. He called PIPE financing
"a huge red flag" and wrote, leaving out some punctuation as he
often does: "I dont want to own stock in companies that use this method
of financing. Why? Because I dont like the idea of selling in a private placement,
stock for less than the market price..."
Surprise. Back in the
70s, a friend was in charge of selling telecom equipment to the mideast. He
added 10% to his bid to take care of the necessary bribes. It was routine. All
his competitors did it. It leveled the playing field. In the beginning only
a handful of officials and royalty got the bribes. But over the years, the population
grew and the percentage climbed. Baksheesh is a way of life over there. I was
amused to read today's New York Times. How could we be so naive?
Iraq Is Quietly Firing Fraud Monitors
The government of Prime Minister Nuri Kamal al-Maliki is systematically dismissing
Iraqi oversight officials, who were installed to fight corruption in Iraqi
ministries by order of the American occupation administration, which had hoped
to bring Western standards of accountability to the notoriously opaque and
graft-ridden bureaucracy here.
which were confirmed by senior Iraqi and American government officials on
Sunday and Monday, have come as estimates of official Iraqi corruption have
soared. One Iraqi former chief investigator recently testified before Congress
that $13 billion in reconstruction funds from the United States had
been lost to fraud, embezzlement, theft and waste by Iraqi government officials.
The moves have
not been publicly announced by Mr. Malikis government, but word of them
has begun to circulate through the layers of Iraqi bureaucracy as Parliament
prepares to vote on a long-awaited security agreement.
That pact sets
the terms for continued American presence here after the United Nations mandate
expires Dec. 31, but also amounts to a framework for a steady reduction in
that presence. Such a change will undoubtedly lessen American oversight of
While some Iraqi
officials defended the dismissals, saying there had been no political motivation,
others pointed to the secrecy involved as supporting their view that those
removed had lost their posts without good cause. Each of Iraqs 30 cabinet-level
ministries has one inspector general. These oversight officials are supported
by varying budgets and staffing. ...
A totally wonderful, clever video on YouTube.
Watch it. Your kids will love it. Everyone needs a black hole.
of Solace: You can safely skip the latest James Bond movie.
For my taste, the plot was too hard to follow. There were too many silly chases.
There was only one Bond wisecrack. I was so bored, I wanted to leave the theater
at least three times. Save your money. Go see a Body of Lies. A much
A man kills a deer and takes it home to cook for dinner.
Both he and his
wife decide that they won't tell the kids what kind of meat it is, but will
give them a clue and let them guess.
The kids were
eager to know what the meat was on their plates, so they begged their dad for
The dad said,
"Well, it's what mommy calls me sometimes."
The little girl
screams to her brother, "Don't eat it! It's an asshole!"
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
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