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Harry Newton's In Search of The Perfect Investment Technology Investor. Harry Newton Previous Columns
9:00 AM EST, Thursday, July 30, 2009. Mulling is good. Checking is good. Due diligence is good. Testing is good. Hasty decisions are always wrong.

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Some potential investments take their sweet time to answer my due diligence questions.

But my new bank is jumping all over me to give them money for their 90-day 2.0% money market fund, which actually is paying more than their one-year CDs. (Go figure.)

None of my friends know what to do with their cash. Most are wasting enormous amounts of time putting gobs of $200,000 into FDIC-insured banks all over the kingdom. No one knows which banks will be next. Nearly 100 have gone this year alone and more will. Everyone is afraid theirs will be next.

You wonder how Washington can encourage us to save and then reward us so little for actually doing what they want.

Some of my friends are writing covered short-term, in-the-money calls. You get paid a few shekels for the calls. It's protection on the downside, but a limit on the upside. But who cares? The objective is to eke out better than 2% a year

How does Goldman Sachs make so much money? New York Magazine has a cover story headed "Is Goldman Sachs evil?" (The answer was inconclusive.)

The article begins, "Inside Goldman Sachs, America’s most successful, cynical, envied, despised, and (in its view, anyway) misunderstood engine of capitalism."

My personal obsession with Goldman is simple: I'm a several-year Goldman client. They've never made me a nickel. In fact, they continue to lose my money. I really want to know how Goldman makes it for itself (since that seems to be all that matters). The article includes this:

But the groupthink is only a social manifestation of the giant hive mind that really makes Goldman tick. Because it transacts deals both as a trading house for huge institutional investors and as a fee-based adviser to the companies being traded, the firm has become a huge repository for information, with a view into what everyone is doing. So if a big investor wants to buy into, say, the energy market, Goldman Sachs, by virtue of its knowledge of what other big investors are trading and what its corporate energy clients are doing (on Goldman’s own advice), can offer a highly accurate view of what’s likely to happen with the energy market. It can also do damned well on its own energy trades—in fact, before the market crashed, the firm made vast profits on “proprietary trading,” bets made on its own balance sheets.

On Wall Street, there are two interpretations of this business model: Either the firm is so brilliant at making near-riskless bets that it continually attracts more clients, who don’t mind being used for the golden database if it means more profits for them—or it’s a giant casino in which the house has gamed the system by knowing every hand at the table and using that information to enrich itself at the expense of others.

“If you’re able to use information and share it, you have a huge advantage over anybody but the energy companies themselves in their own trading businesses,” observes Frank Suozzo, a Wall Street analyst who spent ten years covering Goldman Sachs for AllianceBernstein. “That is Goldman’s advantage. Basically, it is legal card-counting, which most clients accept as a necessary evil to deal with the company with the most information.”

Goldman claims that there is a Chinese Wall between the advisory business and the trading business. “There are rules and laws regarding information sharing, and we scrupulously follow them,” says a company spokesman.

But two former clients told me they had observed firsthand how Goldman traded against their interests to improve its own bottom line—one who didn’t like it, the other accepting it with a shrug and saying, admiringly, that Goldman’s ability to convince the world that it is a “client-oriented” business was its most masterful PR coup.

Goldman’s profiting from this ethical gray area was exemplified by the real-estate market and the subprime-mortgage collapse: Goldman Sachs sold subprime-mortgage investments to its clients for years, but then in 2006 began trading against subprime on its own balance sheet without informing its clients, a hedge that ultimately let it profit when the real-estate market cratered. For some, this was a prescient call; for others, a glaring conflict of interest and inherently dishonest, since the firm let its clients take the fall.

Goldman’s penchant for playing all sides has been business as usual for years, but no one really paid much attention—partly because the economy was booming and there seemed to be plenty of profit to go around. But what once seemed like ruthless laissez-faire capitalism now looks like a rigged market in which Goldman Sachs has far too much control. Earlier this month, Goldman had an ex-employee arrested for allegedly stealing computer codes that could be used, as the prosecutor noted, “to manipulate markets in unfair ways.” Some hedge-fund traders and financial bloggers have speculated that Goldman itself could have been using the codes for the same purpose.

Our government at work. The Fed did nothing to stop the mortgage madness that led to the mess we're in. It didn't stop the dishonest brokers. It didn't stop the ninja liar loans. It didn't even look at the securitization of garbage loans, or their ludicrous rating as AAA. Now, after the horse has well and truly bolted, it's just issued "5 Tips for Shopping for a Mortgage." I kid you not. I don't make this stuff up. The Federal Reserve Board put this crap on their web site yesterday and proudly issued a press release to celebrate their brilliance. Why am I not impressed?

1. Know what you can afford.
Review your monthly spending plan to estimate what you can afford to pay for a home, including the mortgage, property taxes, insurance, and monthly maintenance and utilities. Make sure you save for emergencies. Plan ahead to be sure you will be able to afford your monthly payments for several years. Check your credit report to make sure that the information in it is accurate. A higher credit score may help you get a lower interest rate on your mortgage.

2. Shop around--compare loans from lenders and brokers.
Shopping takes time and energy, but not shopping around can cost you thousands of dollars. You can get a mortgage loan from mortgage lenders or mortgage brokers. Brokers arrange mortgage loans with a lender rather than lend money directly; in other words, brokers sell you a loan from a lender. Neither lenders nor brokers have to find the best loan for you--to find the best loan, you have to do the shopping. For more information on mortgage shopping, see Looking for the Best Mortgage--Shop, Compare, Negotiate.

3. Understand loan prices and fees.
Many consumers accept the first loan offered and don't realize that they may be able to get a better loan. On any given day, lenders and brokers may offer different interest rates and fees to different consumers for the same loan, even when those consumers have the same loan qualifications. Keep in mind that lenders and brokers also consider the profit they receive if you agree to the terms of a loan with higher fees, higher points, or a higher interest rate. Shopping around is your best way to avoid more expensive loans.

4. Know the risks and benefits of loan options.
Mortgages have many features--some have fixed interest rates and some have adjustable rates; some have payment adjustments; on some you pay only the interest on the loan for a while and then you pay down the principal (the loan amount); some charge you a penalty for paying the loan off early; and some have a large payment due at the end of the loan (a balloon payment). Consider all mortgage features, the APR (annual percentage rate), and the settlement costs. Ask your lender to calculate how much your monthly payments could be a year from now, and 5 or 10 years from now. A mortgage shopping worksheet can help you identify the features of different loans. Mortgage calculators can help you compare payments and the equity you could build with different mortgage loans.

5. Get advice from trusted sources.
A mortgage loan is one of the most complex, most expensive financial commitments you will ever assume--it’s okay to ask for help. Talk with a trusted housing counselor or a real estate attorney that you hire to review your documents before you sign them. You can find a list of counseling resources at NeighborWorks and on the U.S. Department of Housing and Urban Development's (HUD) website or by calling (800) 569-4287.

With this advice and $2.25 I'll get a ride on the New York subway. Why am I feeling increasingly annoyed at Washington? Was it Kennedy who said, "Washington is eight square miles surrounded by reality." Why am I thinking the man was a genius?

Microsoft's Bing is a good search engine. But is is better than Google? Check for yourself. Go to a site called Type in what you're looking for. Don't type in Harry Newton. That's my ego gone wild.. Type in your own name. Bingo, you'll get their results side-by-side, like this:

Dear Abby was stumped.
Dear Abby,
A couple of women moved in across the hall from me. One is a middle-aged gym teacher and the other is a social worker in her mid twenties. These two women go everywhere together, and I've never seen a man go into or leave their apartment. Do you think they could be Lebanese?

Dear Abby,
What can I do about all the Sex, Nudity, Fowl Language and Violence on my DVD?

Dear Abby,
I have a man I can't trust. He cheats so much, I'm not even sure the baby I'm carrying is his.

Dear Abby,
I am a twenty-three year old liberated woman who has been on the pill for two years. It's getting expensive and I think my boyfriend should share half the cost, but I don't know him well enough to discuss money with him.

Dear Abby,
I've suspected that my husband has been fooling around, and when confronted with the evidence, he denied everything and said it would never happen again.

Dear Abby,
Our son writes that he is taking Judo. Why would a boy who was raised in a good Christian home turn against his own?

Dear Abby,
My forty year old son has been paying a psychiatrist $50 an hour every week for two and a half years. He must be crazy.

Dear Abby,
I was married to Bill for three months. I didn't know he drank until one night he came home sober.

Dear Abby,
You told some woman whose husband had lost all interest in sex to send him to a doctor Well, my husband lost all interest in sex and he is a doctor. Now what do I do?

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. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.