Harry Newton's In Search of The Perfect Investment
9:00 AM EST, Thursday, October 30, 2008: 79
years ago. On October 28, 1929 the stockmarket fell 38.3%. The following day
it fell 30.6%. From October 1929 to the summer of 1932,
86% of stock market value was wiped out. By 1933, one-third of U.S. banks
had closed and 25% of the population was unemployed. John Kenneth Galbraith
wrote in his book The Great Crash, "there were no reasons for expecting
disaster. No one could foresee that production, prices, incomes and all other
indicators would continue to shrink through three long and dismal years."
I instance this
because there are aspects of today's mess that are eeringly familiar. There
is one BIG difference, Our government is spending money like a drunken sailor.
Any time I have personally jumped into something without adequate thought, the
end result was a disaster. Washington's Bailout Plan was done in a rush, without
thought. It is proving one gigantic disaster. AIG is spending and spending more
of my taxpayer money. Where
did the (AIG) cash go? The banks we gave huge monies to were meant to
lend it to businesses and people to get the economy moving. But they're not
lending any money, they're buying other banks.
I don't blame
them. Why would anyone lend against assets that are falling in value? Banks
typically lend against real estate. Here are some stories from New York real
estate. They all happened in recent days:
+ One fellow walked
from his $200,000 downpayment because he figures the value of the apartment
has dropped far more than $200,000 since the time he signed the contract, and
he doesn't want to throw good money after bad. That's set in motion a chain
of events where his seller must default on her purchase, because she can't afford
to buy without the fellow buying, so she's walking away from $350,000. Yuch.
+ The buyer was
about to sign the contract. At the last minute he said to his seller, "not
at this price I'm not". The seller agreed to drop his price almost 15%
to get the deal done. It got done at a 15% lower price.
+ A prospective
tenant negotiated an office lease downtown. The lease is ready to sign. The
tenant came in and said $4 off per square foot (about 10%). The landlord agreed
to the reduction and one month free rent. Then the prospective tenant says "We
need a million dollars less over the term of the lease." The landlord said
"We'll give you half a million." On Friday, the tenant called the
landlord, "We have signed your lease and attached a different rent schedule.
Enclosed is a check for the first month's rent and the security deposit."
As of writing this morning, the landlord hadn't seen his new rent schedule.
+ In the last
three weeks, demand for New York City commercial rentals "have fallen off
Today's tips: Always negotiate your hotel bills over the phone with the hotel
directly. Nobody is staying in luxury hotels any longer. My friend recommends
this approach: "I'm coming in for three nights. Give me your best room
at your cheapest rates."
If you're renting
space, be aware landlords don't like to drop their asking rents. But they will
give you oodles of free rent.
ultra-high dividend yielders smell ultra-sick: In
my October 1 column I talked about ultra-high yields. I wrote, "There's
even one called Golden Ocean Group (GDOCF) yielding 59% to 65% (depending on
how you figure). It's a dry bulk shipper. It yields a lot because the market
thinks it's going out of business. Its stock has cratered." Here is the
chart from October 1.
Here is the chart from last night:
On October 1,
I wrote, "Spot rates for bulk cargo have cratered. There's another one
called Star Bulk Carriers (SBLK) which is yielding only 20%. In this case the
dividend looks more solid, since the company has forward sold its capacity for
the next several years."
Look at last night's
chart. The price has cratered further. But the dividend yield is now 32.4%.
In short, don't
believe high dividend yields. Often they just get higher and higher in today's
changed servers: The Internet works by numbers. It translates names,
like www.InSearchOfThePerfectInvestment.com to a number, like 184.108.40.206.
The idiots at my hoster, web.com "upgraded" my site last week. But
they forgot to point InSearchOfThePerfectInvestment.com to the new web site.
For now, it's best to reach my site by going to www.TechnologyInvestor.com.
Photoshop wonderful? Halloween is tomorrow
New Yorker cartoons.
My brain keep
reminding me of two old nuggets,
+ "If the
Federal Government were put in charge of the Sahara Desert, within five years
there'd be a shortage of sand."
+ Washington is
8 square miles surrounded by reality. John F. Kennedy (or someone else).
Been on Amtrak
lately? Sadly, I am forced to ride it regularly. I figure one in ten Amtrak
trains arrive at their destination on time. When one arrives on time, all the
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.
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