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8:45 AM Thursday, February 17, 2005: Twice a year Greenspan goes before Congress to say he has the economy under control and everything looks rosy, viz.:

The Fed's Forecast
  2004 2005 (forecast) 2006 (forecast)
GDP growth 3.70% 3.75% to 4.0% 3.5%
Inflation* 1.60% 1.5% to 1.75% 1.5% to 1.75%
4th quarter unemployment 5.40% 5.25% 5.0% to 5.25%
* Prices for personal consumption, excluding food and energy
Source: Federal Reserve

While the Fed has been raising short-term rates, long-term rates -- the ones of importance to real estate financing -- have been declining. Why and what's their future? From today's Journal:

"The Fed chief dwelt at length on the unusual decline in long-term bond yields since the Fed began raising short-term rates, which "contrasts with most experience." He played down technical explanations such as purchases of Treasury bonds by Asian central banks, mortgage hedging, and even confidence in low inflation.

Mr. Greenspan concluded the drop is "a conundrum," which may prove to be a "short-term aberration." He noted that measures of risk are unusually low across many markets, and, in a remark reminiscent of his warning about "irrational exuberance" in 1996, warned: "People experiencing long periods of relative stability are prone to excess. We must thus remain vigilant against complacency."

Greenspan didn't talk about a "bubble" in real estate. He talked about "complacency." Same thing. Latest numbers show that in some parts of the country home prices last year jumped 30%-plus. Prices in the Washington, DC area rose 24% last year. That's a bubble.

So what's the implication for us? In three words: Play it conservatively. Sell a little if you have too much and you owe too much. Don't make ridiculous assumptions about future price hikes. Don't plan the success of your real estate project on continued strong price hikes. Always ask yourself, if it doesn't grow at 20% next year, if I can't raise my rents, where will I be?

Key interest rates for real estate: I've added two neat tools in the left hand column. One is "Financial calculators." You can do the same calculations in Excel or on a HP calculator, but these are easier. The second is called "Weekly Interest Rates." They give the key interest rates -- from T-bills, to Swap rates, Libor and US Prime and US discount. The rates come courtesy Chuck Cronin, president of Axiom Capital. Chuck is one of the smartest mortgage brokers I've met in a while. If you need money for your big project, call Chuck at Axiom. Click here.

More takeover possibilities:
from Stephen J Campbell.

Harry: Five possibilities in no particular order: NYB New York Comm bank-reminds me of Fleet Bank pre BAC good dividend, worth 25-30; UVN Univision largest Hispanic broadcaster in U.S., down from 37 and in the middle of boardroom disagreements; CYBX Cyberonics, medical device maker- just received FDA approval for severe depression along with Epilepsy approval previously- 3 cos. own 15% each, BSX, ANSI and STJ; LGF Lionsgate-film producer and distributor (including Michael Moore's film); and last CL Colgate-Palmolive, needs to compete with PG/G, UN, CHD- everyone has to get bigger. Thanks,

Unreal: Four top brokerage firms gave their CEOs an average raise of 33% last year, while the firms' stocks rose only an average of 4.7%. The firms are Merrill Lynch & Co., Morgan Stanley, Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc.. Makes you wonder what their boards were thinking.

Everyone is coming to New York to the see the Gates: Including Laura Bush.

For coverage on The Gates, click here.

Marriage Saver: Radio Shack sells these wireless headphones for $59.99. Now you can hear at your volume (loud). And she can hear at her volume (imperceptible).


To buy them, Click here.

You'll find your TV doesn't have enough output jacks to accommodate your headset and her speakers. So you'll need this also:

$4.99 from Crutchfield.com. Click here.

iPod connector.
The press is full of expensive gadgets to connect your iPod to and hear great sound. A cheaper, better way is to connect your iPod to your existing sound system. To do that you'll need this $7 cable. Just plug the white and red cords into one of your aux inputs. Plug the other end into the headphone plug on your iPod.

Click here.

So where's the inflation? I paid $1500 for my Nikon D100 a year ago. Now it's $1099 at J&R World. Click here. A one gigabyte memory card costs $99.88. I paid three times that. I really recommend this camera. You will not believe the quality of the photos. I bought the 85 mm portrait lens. It's fabulous.

An Ode To Spam: From an actual email yesterday: "We have the cure for every ailment u have."

STOCKMARKET LOGIC
Jim and Edna were both patients in a mental hospital. One day while they were walking past the hospital swimming pool, Jim suddenly jumped into the deep end. He sank to the bottom of the pool and stayed there. Edna promptly jumped in to save him. She swam to the bottom and pulled Jim out.
When the Director of Nursing became aware of Edna's heroic act, she immediately ordered Edna to be discharged from the hospital, as she now considered her to be mentally stable.
When she went to tell Edna the news she said, "Edna, I have good news and bad news. The good news is you're being discharged; since you were able to rationally respond to a crisis by jumping in and saving the life of another patient, I have concluded that your act displays sound mindedness.
The bad news is that Jim, the patient you saved, hung himself in his bathroom with the belt to his robe right after you saved him. I am so sorry, but he's dead."
Edna replied "He didn't hang himself, I put him there to dry. How soon can I go home"?

IN THE OLD COUNTRY
In a small town in the Old Country, the Rabbi died.
His widow, the Rebbetzin, was so disconsolate that the people of the town decided that she ought to get married again. But the town was so small that the only eligible bachelor was the town butcher.
The poor Rebbetzin was somewhat dismayed because she had been wed to a scholar, and the butcher had no great formal education.
However, she was lonely, so she agreed, and they were married. After the marriage, Friday came. She went to the mikvah (a Jewish ritual bath to get rid of impurities). Then, she went home to prepare to light the candles.
The butcher leaned over to her and said, "My mother told me that after the mikvah and before lighting the candles, it's a mitzvah to have sex." So they did.
She lit the candles. He leaned over again and said, "My father told me that after lighting the candles it's good to have sex." So they did.
They went to bed after prayers to get ready for Shabbos. When they awoke he said to her, "My grandmother said that before you go to the synagogue it's a mitzvah to have sex." So they did.
After praying all morning, they came home to rest; and again he whispers in her ear, "My grandfather says after praying it's a mitzvah to have sex." So they did.
On Sunday she went out to shop for food and met a friend who asked, "Nu, so how is the new husband?"
She replied, "Well, he is no scholar; but he comes from such a wonderful family."


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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