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

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8:30 AM Friday, October 28, 2005: "Buy and Hold" or "Flip and Switch?." My dear friend, Dan Good, rebukes me,

You morph from one strategy to another faster than your renowned lightning-like sexual behavior. Espousing manager selection one day and heavy concentration in few stocks the next. You don’t have the discipline to invest in only three stocks. You are a born dabbler and need the next best thing (idea) to keep your interest and attention.

Touché. My dream life would be: Give all my money to half a dozen money managers, take a laptop and go on the tennis circuit.

It's not going to happen because some of the managers I choose -- with such extensive research and great due diligence -- have turned out, so far, to be just goddammed awful. Most are under water for this year. Most don't follow my philosophy of finite stop losses. Most have bought stocks that I wouldn't go near with a 10-foot barge pool. One manager bought me stock in the New York Times, which has fallen 41% since he bought it for me and whose chart looks like shit and he still holds it (despite my exhortations). Said I, "I've been in publishing for 30 years. I know how bad it is out there in print media and how the Times has miserably mismanaged its miserable adventures into digital."

Am I a better manager? Categorically, yes. But the measure of my success is not my sterling growth rate. It's not great. But it's at least above water, hence better than most of my managers. My success also stemps from the fact that I've missed investing in disasters, like the New York Times or Gannett (another newspaper company which he bought me). I've missed BIG disasters. I've also diversified into real estate and commodities and stayed heavily in cash -- virtually all in triple-taxfree municipal floaters -- and only played a few opportunities. I've stayed in my biotechs. I've stayed with Whole Foods (WFMI) and I've flitted quickly in and out of special situations as they came along. I closed my Research in Motion (RIMM) short after I'd reached a $6,000 profit. And I sold my Novavax (NVAX) after it started falling, but I still made a $2,500 profit.

The only recommendations I'd make comfortably today would be InSite Vision (ISV) and VioQuest (VQPH) -- cheap biotech stocks that should double within the next year. But I wouldn't bet the farm on them, or even back the truck up. They're worth a shot.

Remember, money managers get paid when they're invested -- not when they're in cash.

Where now? I'm not optimistic about the overall stockmarket. All the indices -- the S&P 500, Dow Jones, and NASDAQ -- are down this year. They all look headed for a substantial loss this year.

Some readers have accused me of being unduly pessimistic. Believe me, I'm not. I wouldn't be out there, searching, attending conferences, reading, talking, and investing IF I didn't feel confident. I'd had all my money in my mattress, like my grandfather did. But I recognize the name of this game is not buy and hold, or flip and switch... it's Preservation of Capital. Right now, the bulk of my managers are doing Buy and Hold, which translates to loss of capital. And that's DUMB.

The housing boom continues to ebb:
Sales of new homes rose 2.1% in September from August, but prices dropped and the number of homes for sale increased. It's also taking longer to sell homes. Rising interest rates are taking their toll. Housing has been a mainstay of the economy, keeping it from falling into recession. But inflation has reared its ugly head and the Feds are clobbering it with hefty interest rate hikes. Making money in this environment is "opportunistic" -- Wall Street's new word for ultra short-term moves -- like my NVAX rise and my RIMM fall.

Why Banks are sometimes Bancs?:
My friend, the talented hedge fund manager, Dennis Mykytyn of Modern Capital Management explains:

It's a law. You cannot use the word "Bank" unless you are a registered Bank. So you cannot set up a company and call it Bank of Newton. Securities firms are not Banks, so when they start a broker, they spell Bank as Banc to get around the law.

It is bizarre.

Buying an flat-screen LCD monitor: This is my desk at my country house. I'm a multiple screen junkie. It's enormously productive. The laptop on the left drives the three top screens. The right hand screen is driven directly by the laptop. The two left ones are driven by the laptop via a $250 VillageTronic PC Card. (Click here.)

What I've learned:
1. Only buy a digital monitor with a DVI input. These ones each cost around $420.
2. 19" monitors are perfect.
3. Don't put yourself in a corner and circle the screens around you, as I have here. Better to have the screens in a straight line.
4. The ideal height for the wooden stand is 9 1/2 inches. It should be 10 inches deep and at least 80 inches wide.
5. The best monitors are those with short stands. These ones are ViewSonic Their stands were far too high. I had to remove them and attach them to a triple monitor stand, which was a pain. Waste of time and money.
6. A cheap 13" TV screen works just fine. Be best if you can get one with built-in DVD and VCR drives, or at least one DVD drive.

Imagine when LEDs replace incandescents: One third of the electricity produced on Earth is used to power electric light bulbs.

How well threats work: With the threat of economic sanctions looming over Syria, officials said this week they would reconsider a decision that stripped Kurds of their citizenship. Ask yourself one question: Why would any country strip citizenship rights from their hardest-working, most successful, brightest group of people? Go figure!

How Wall Street "humor" works.
On October 19, John Harris, managing director of the enormously successful Carlyle Group of private equity funds, gave a PowerPoint presentation. Remember the best humor is based on truth. Among his first few slides were these:

John F. Harris is a Managing Director and Carlyle's Chief Financial Officer. Mr. Harris has overall responsibility for the firm's investor reporting, internal controls and financial management. He is based in Washington, DC.
As Chief Financial Officer, Mr. Harris has been instrumental in structuring Carlyle's private equity funds and negotiating terms with limited partners. In addition, Mr. Harris has coordinated the development of Carlyle's global compensation programs.

Now go back and read his slides. They're brilliant.

How Marketing Works
You're a lady and you see a handsome guy at a party. You go up to him and say, "I'm fantastic in bed."
That's Direct Marketing.

You're at a party with a bunch of friends and see a handsome guy. One of your friends goes up to him and, pointing at you, says, "She's fantastic in bed."
That's Advertising.

You see a handsome guy at a party. You go up to him and get his telephone number. The next day you call him and say, "Hi, I'm fantastic in bed."
That's Telemarketing.

You see a guy at a party, you straighten your dress. You walk up to him and pour him a drink. You say, "May I," and reach up to straighten his tie, brushing your breast lightly against his arm, and then say, "By the way, I'm fantastic in bed."
That's Public Relations.

You're at a party and see a handsome guy. He walks up to you and says, "I hear you're fantastic in bed."
That's Brand Recognition.

You're at a party and see a handsome guy. He fancies you, but you talk him into going home with your friend.
That's sales.

Your friend can't satisfy him so she calls you.
That's Tech Support.

You're on your way to a party when you realize that there could be handsome men in all these houses you're passing. So you climb onto the roof of one situated near the center of the block and shout at the top of your lungs, "I'm fantastic in bed!"
That's Junk Mail.

You are at a party when a well-built man walks up to you and gropes your breast and grabs your ass.
That's the Governor of California.

You like it, but twenty years later your attorney decides you were offended and he files a lawsuit on your behalf.
That's America.

Pest Control:
A woman was having a passionate affair with an inspector from a pest-control company. One afternoon they were carrying on in the bedroom when her husband arrived home unexpectedly. "Quick," said the woman to her lover," into the closet!" and she pushed him in the,closet, stark naked.

The husband, however, became suspicious and after a search of the bedroom discovered the man in the closet. "Who are you?" he asked.

"I'm an inspector from Bugs-B-Gone," said the exterminator.

"What are you doing in there?" the husband asked.

"I'm investigating a complaint about an infestation of moths," the man replied. "And where are your clothes?" asked the husband.

The man looked down at himself and said, "Those sneaky little bastards."

Recent column highlights:
+ Dumb reasons we hold losing stocks. Click here.
+ How my private equity fund is doing. Click here.
+ Blackstone private equity funds. Click here.
+ Manhattan Pharmaceuticals: Click here.
+ NovaDel Biosciences appeals. Click here.
+ Hana Biosciences appeals. Click here.
+ All turned on by biotech. Click here.
+ Steve Jobs Commencement Address. The text is available: Click here. The full audio is available. Click here.
+ The March of the Penguins, an exquisite movie. Click here.
+ When to sell stocks. Click here.

Harry Newton

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, click here and here.
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