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8:30 AM Tuesday, January 25, 2005: My friend yesterday refinanced a property for more money than he paid for the building a year ago. In other words, he "sold" the building but kept it. And the transaction is tax-free, since it's a loan, not a sale. Get it? What's amazing is that banks were climbing over each other to lend money to him at ten-year rates that were 105 to 120 points above the presently-low 10-year treasury note rate, namely 4.12%. (See chart.)

The great phenomenon of today's economy remains how longer-term interest rates (the ones used to benchmark real estate loans) have stayed low -- in fact have fallen. Look at 10-year treasuries.




Now look at 30-year Treasuries. This curve is even more steep -- downwards.



The second phenomenon (which I can't chart this morning -- but trust me) is that commercial real estate rents -- for office buildings and shopping centers -- have been firming, i.e. rising. And that includes rents in even places as "depressed" as Silicon Valley -- the area just south of San Francisco.

What's even more amazing (at least to me) is that there seems to be an unlimited demand for high-end (expensive) places to lives. They're tearing down the Mayflower Hotel two blocks from where I live in New York and replacing it with condonimiums that allegedly will each sell for $3,000 a square foot. That's a lot of money, at least to my pocketbook.

Now look what's happening in the stockmarket:







Now ask yourself, "Why isn't the media promoting real estate investment, instead of stocks, stocks, stocks?" And the answer is that most real estate deals are private, with performance statistics hard to find. Of course, the cognoscenti know what's going on. And the intelligent ones are taking advantage of it like there was no tomorrow. One caveat: It ain't easy. My friend reports that his firm looks at 400 deals a month, to bid on perhaps eight, to buy one. That's a one-in-400 ratio. That requires major perseverance and a phalanx of analysts examining bum deal over bum deal.

Read that again. One-in-400. That's hard work. But the good news is that you have an asset whose success is more a function of arithmetic and mathematics than gambling. Whoever knew the stockmarket would collapse in 2005, despite generally higher earnings? That's gambling.

Where now for the stockmarket? Fact is, as usual, no one knows. One observer I read this morning writes: "After that final blow-off upside move, the market will be highly vulnerable -- and perhaps we'll see the return of the bear market on the back of too many Fed rate hikes, and a broad economic slowdown. That would be later in 2005 if it's coming. ... If this outline is correct, most people will get brutally whipsawed by the declines and advances, finding themselves bearish at the major bottoms, and oh-so-bullish at the tops."

For now, I'm seeing what pleasures I can find in real estate and some ultra-short term gains on the market. They're not easy. My "brilliant" shorting of AT&T is presently break-even. You'd think....

Moreover, it's too early to start picking up "bargains." Remember the old adage, "Don't try to catch a falling knife."

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The BIG tennis match of the year is on today: You'll see Agassi play Federer today at 2 PM on ESPN2. The match has already happened, of course. But I don't know the results and don't want to know them.

Organize your financial paperwork:
Marshall Loeb of MarketWatch quotes Fred Rewey, author of the new book "Winning the Cash Flow War," on what paperwork to keep, and what to toss.

"You should have at least three files for your financial paperwork -- label them "critical," "active" and "dead storage." In the "critical" file, collect important paperwork that would be hard to replace and vital to save in an emergency. Include:

Marriage certificates and divorce decrees
Titles, deeds or registrations for property and vehicles
Mortgage and other loan information
Insurance policies
Investment records
Credit-card statements
Income tax information (copies of past returns, proof of estimated tax payments)
Social Security cards
Wills
Birth certificates
Copies of your identification cards such driver's license, green card or passport
Keep a file with the original documents in a safe place, such as a fireproof box in your home or a safe deposit box.

Your "active" file should hold important financial documents from the past three years. Include:

Unpaid bills (then mark with date paid)
Bill receipts
Bank statements
Canceled checks
Income tax paperwork, such as W-2 and 1099 forms
Your "dead storage" file should include things that were previously in your "active" file, as well as documents from up to seven years ago. Any financial document older than that can safely be tossed out -- but remember to shred it first.

For tax documents, remember that the IRS has a three-year time period within which to audit your federal tax returns, and six years to initiate legal proceedings if you failed to report 25 percent or more of your income. There is no statute of limitations for the government to start legal proceedings if you filed a fraudulent return or if you failed to file a return at all.

I love this cartoon:


The newly-wed couple
A young newlywed couple wanted to join a church. The pastor told them, "We have special requirements for new parishioners. You must abstain from sex for one whole month"

The couple agreed and after two-and-a-half weeks returned to the Church. When the Pastor ushered them into his office, the wife was crying and the husband obviously very depressed.

"You are back so soon... Is there a problem?" the pastor inquired. "We are terribly ashamed to admit that we did not manage to abstain from sex for the required month...." the young man replied sadly. The pastor asked him what happened.

"Well, the first week was difficult.... However, we managed to abstain through sheer willpower. The second week was terrible, but with the use of prayer, we managed to abstain."

"However, the third week was unbearable. We tried cold showers, prayer, reading from the Bible.... anything to keep our minds off carnal thoughts.

One afternoon, my wife reached for a can of paint and dropped it. When she bent over to pick it up, I was overcome with lust and had my way with her right then and there," admitted the man, shamefacedly.

"You understand this means you will not be welcome in our church," stated the pastor.

"We know." said the young man, hanging his head, "We're not welcome at Home Depot either."


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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