Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST, Friday, September 7, 2007: We
have two economies. One that's doing well. It is export, health care and technology.
One that is not doing well. It is finance and housing. The booming economy doesn't
employ as many people as the depressed economy, so economic statistics will
look ugly for the next couple of months and possibly hurt the price of stocks.
Statistics likely to look ugly -- employment (not strong), housing (cratering),
and consumer credit (skyrocketing -- consumers are putting their spending on
their credit cards).
Every Fed interest
tightening of the past 50 years has led to some form of financial crisis --
this one, too. But we've also recovered handsomely from each one. And stocks
have gone higher.
Fed policy has
switched from tightening to neutral. Soon it will be dropping interest rates,
which will be good for stocks. There is some hope the loosening may happen at
the next Fed meeting on September 18. Bernanke recently said:
It is not the
responsibility of the Federal Reserve - nor would it be appropriate - to protect
lenders and investors from the consequences of their financial decisions.
But developments in financial markets can have broad economic effects felt
by many outside the markets, and the Federal Reserve must take those effects
into account when determining policy.
It's only a matter
of time before the Fed eases. When this happens stocks will boom -- irrespective
of the underlying economy. Meantime your job (and mine) is to find solid stocks
that have been beaten down a little too much. I do like two oil trusts -- PWE
and ERF. Both have huge dividend yields -- 13.30% and 10.9% respectively.
I like Dril-Quip but it's bounced back strongly. I'm still looking. It's hard
to focus on this when the tennis is so engrossing. I don't feel a huge urgency
to put all my cash to work.
financial media -- heed it or ignore it? There
are sound arguments for reading it and ignoring it, i.e. not panicking.
That's the discipline you need when reading The Wall Street Journal, The
New York Times, or watching BubbleVision (CNBC). We all need to understand
that driving the financial press is the urgency of filling space or filling
time. Happy stories don't appeal to financial reporters, most of whom are poorly-paid
and have few investments. Their envy of others' riches orients them to "disaster"
stories. The classic Forbes magazine story ends, "The company has
had 28 quarters of increasing sales and earnings, but can they keep it up?"
the press has run several disaster stories on commercial real estate. "The
next shoe to drop is the value of commercial real estate," etc. I sent
the latest disaster story to one of my syndicators. His reply:
We have somewhat
of a contrarian view with regard to our ABC (name changed) project. We have
forward swapped the rate for the planned acquisitions through November (17
buildings and over half the total program size) at between 4.8% and 4.9%,
so at Libor + 160 we are at about 6.5 all in. Also, we expect rates to stabilize
later this year.
fear in the market has shaken loose some assets we have been chasing at more
acceptable pricing, thus we are ahead of schedule and calling for 65% of the
total equity. Rents in the portfolio are ahead of pro-forma as well. ABC is
a retail sub-market that has traditionally been resilient to market cycles
thanks in part to the efforts of you wife and daughter and the predominantly
wealthy, international foot traffic that flocks to this shopping district
every year. In summary, we think a down spike in investor sentiment is a great
time to buy in established markets and the current environment has actually
helped us move the program along more quickly.
I agree that
the press have been pretty ugly. With regard to the article you sent me we
are talking about apples and oranges. The scarcity of the ABC assets will
drive the value. We are not overly leveraged so we do not have the problems
other guys have. We always thought the flippers, which we are not, would get
caught when the music stops. The music has stopped and they are caught. No
big deal to us because we never played in that game. We didn't play in condos
in the 80's, or telecom hotels in the 90's or any other capital-driven, flavor-of-the-month
categories that Wall Street funds and then explodes. We have never had a capital
loss because we play the game differently than others. We can't control the
market, but we are pretty good at making safe bets with good upside. Hope
The comedian Mort
Sahl joked if the world were to end tomorrow, The New York Times headline
would be: "World Ends! Women and Minorities Hit Hardest."
a hedge on the post office: "First class" stamps at the
Post Office are good forever -- irrespective of what the new, higher first class
rate might be.
wary of Motorola phones and gadgetry: Motorola usually makes great
hardware, but lousy software. Recently friends have found their Motorola phones
breaking, especially the RAZR series. I've always shied from Motorola cell phones.
"free" money: They give me 10% off
for opening a credit card with them. Now I know why. I get my first bill from
them. If I don't pay in full by September 28, I get hit with a 22.90%
annual finance rate. Heh, that's nice money -- if you can collect it. For me,
I'm paying on time, maybe a day early. Just to be sure.
of life's great pleasures: There am I biking home through New York's
Central Park, when I happen on a red tailed hawk sitting on a tree branch eating
a pigeon he (or she) had just caught. A birder who was also watching told me
it was very rare to be so close -- about 12 feet -- to a feeding hawk. Six breeding
pairs live around Central Park. They nest on the buildings. They don't nest
on the trees because the squirrels will kill their babies. The squirrels perceive
the hawks as their enemy, which they should. The hawks eat squirrels. These
pictures are not of my hawk. I picked them off the Internet. But they look like
Tennis Open. It continues today and finishes this weekend.
When I was forty,
I was getting divorced, living in a low-class, dirty hotel in New York. My
mother was dying of cancer. I owed $20,000. That was about the lowest. I came
back to show business, and I couldn't get a job. I was turned down by every
small-time agent in New York. I started over again with an image, "Nothing
goes right." Then when The Godfather came out, all I heard was,
"Show respect." So I changed the image to "I don't get no respect."
I tried it out in Greenwich Village. I remember the first joke I told, "Even
as a kid, I'd play hide and seek and the other kids wouldn't even look for
me." The people laughed. After the show, they started saying to me, "Me,
too -- I don't get no respect."
very first ever blonde guy joke.
An Irishman, a Mexican and a Blonde Guy were doing construction work on scaffolding
on the 20th floor of a building.
They were eating
lunch and the Irishman said, "Corned beef and cabbage! If I get corned
beef and cabbage one more time for lunch, I'm going to jump off this building."
The Mexican opened
his lunch box and exclaimed, "Burritos again!
If I get burritos
one more time I'm going to jump off, too."
The blond e opened
his lunch and said, " Bologna again! If I get a bologna sandwich one more
time, I'm jumping too."
The next day,
the Irishman opened his lunch box, saw corned beef and cabbage, and jumped to
The Mexican opened
his lunch, saw a burrito, and jumped, too.
The blonde guy
opened his lunch, saw the bologna and jumped to his death as well.
At the funeral,
the Irishman's wife was weeping. She said, "If I'd known how really tired
he was of corned beef and cabbage, I never would have given it to him again!"
wife also wept and said, "I could have given him tacos or enchiladas! I
didn't realize he hated burritos so much."
Oh this is GOOD!
and stared at the blonde's wife. The blonde's wife said, "Don't look at
me. He makes his own lunch ."
living in the remote wilderness of Kentucky all his life, an old hillbilly decided
it was time to visit the big city .
In one of the
stores he picks up a mirror and looks in it. Not ever having seen one before,
he remarked at the image staring back at him, "How about that! Here's a
picture of my daddy."
He bought the
mirror thinking it was a picture of his daddy, but on the way home he remembered
his wife didn't like his father, so he hung it in the barn, and every morning
before leaving for the fields, he would go there and look at it.
His wife began
to get suspicious of these many trips to the barn. One day after her husband
left, she searched the barn and found the mirror.
As she looked
into the glass, she fumed, "So that's the ugly bitch he's running' around
Hug the spouse, the kids and the grandkids. And back up your computer's
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 .
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