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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 9, 2009. The BIG lesson from this recession is simple: Excessive debt is horrible. What's "excessive"? I'd argue any debt is excessive. But then I'm crazy. I'm 67. I've had only one mortgage in my entire life, when we bought a building to house our sales staff. I paid it off a year later. I presently have no mortgages. So no slimy bank can take my mansions away from me.

However, that brilliant philosophy didn't stop me investing in commercial real estate syndicates they did take on mortgages -- usually 75% of the purchase price. That's called leverage and it's a wonderful thing because it increases the return on your investment -- IF you can keep making the mortgage payments.

In today's declining commercial real estate world, that's not easy. Tenants are disappearing. Think Circuit City bankruptcy. Think all the firings from all the banks.

Once you go into default, the bank can take your building. It may take it. It may run it. It may sell it. But, most likely, you've just lost your entire investment. When things are tough (like today), leverage is bad.

One of the reasons the stockmarket collapsed last year was people had borrowed money to buy stock. When the stock fell in price, the lender simply sold the stock to get his money. And that selling caused stocks to decline further.

In short, borrowing money to get rich faster is bad. That's the primary lesson.

The secondary lesson is that funds are bad. Funds typically borrow money. Funds also give management a false sense of what they can do. But that story is for another day. Meantime...

My fantastic Citigroup private equity fund. My latest Morgan Stanley Smith Barney monthly statement shows that the managers of Citigroup Capital Partners II have written down my investment in their crummy fund by 40%. They have 37 remaining investments, including a bunch in bankruptcy like Sports Authority, Clear Channel, CDX Gas, Advanstar and Chrysler.

When I bought into the fund, I was extolled the virtues of a genius called John Barber who was running the fund. Of course, he's long gone, but I'm not.

I think I should rename this site: "In search of the perfect small fortune. How I started with a large one."

Sign of the times. Found yesterday on a SmartMoney web site.

Finally, a painless solution to those zillion photos. You take your new Canon G10 to a family event. You take a zillion gorgeous photos. Then what? Guilt.

Finally a painless solution. Picasa.

1. Put all the photos in a separate folder on your computer. Delete the absolutely awful ones. Turn the vertical ones horizontal.

2. Open Picasa. (it's free. You can download it from here.)

3. Hit File. Add folder.

4. Scan once.

5. Change description of folder, if necessary.

6. Rearrange your photos in Picasa by dragging them into the right order.

7. Sync to web.

8. Share with your friends and family. That sends each an invitation to view your photos.

This morning I grabbed a few photos, put them into a Picasa folder. I'm sharing them them, as a demo, with everyone. Here's the link. The slide show starts with Winnie. She's the best.

10 Things Your Real Estate Broker Won't Tell You. Excepted from SmartMoney.

1. “Your open house is really just a networking party for me.”

Hire a real estate broker to sell your home, and one of the first things he’ll likely suggest is hosting an open house so that potential buyers can casually check out your property on a weekend afternoon. But while open houses are promoted as a great way of finding a buyer, a National Association of Realtors study found that their success rate is a mere 2 to 4 percent. No matter. Holding an open house serves another important purpose—for the broker. “It gives him a database of clients,” says Sean McNeill, an independent real estate broker based in New York City .

2. “My fees are negotiable.”

Brokers like to make it sound as if their fees are engraved in stone, but that’s rarely the case. During the housing bubble, for example, as the number of brokers sharply increased, so did the competition for listings—one broker says he lowered his fee by a full percentage point just to give himself an edge. But even in the wake of the recent crash, you have a good chance of negotiating a better deal—that same surplus of brokers is still out there competing for even fewer listings, giving you something of a leg up.

3. “Think you’ve had no offers? Actually, there’ve been several.”

Legally, the broker you hire to sell your home is obligated to tell you about all offers that come in. In reality, some do not. Perhaps he thinks the offer is insultingly low for you, but more likely, “the broker thinks it’s too low for his own purposes,” says McNeill. “He wants to hold out for a bigger commission.” Another possibility is that there’s an outside broker (or “co-broker”) circling your house, and the primary broker is waiting for one of his own clients to make an offer so he can keep the full 6 percent to himself.

4. “I’m not obligated to keep my mouth shut for you.”

You spot your dream house as you’re driving through a neighborhood and call the broker listed on the “for sale” sign. That’s how a lot of buyers stumble on a broker—who, in turn, happily shows you other houses, asking about your needs, laughing at your jokes. It’s easy to get loose-lipped and forget whom you’re dealing with: someone else’s agent. “Legally, brokers are obligated to provide their sellers with any information that can help them get the best prices for their homes,” says Stephen Israel, president of Buyer’s Edge, a Bethesda, Md.–based company that represents homebuyers. “If you tell the broker that you’re willing to pay $500,000 but want to offer $450,000, they’ll pass that on to the seller. They have to.”

5. “Sometimes I forget whose side I’m on.”

The past 15 years have seen the proliferation of the buyer broker, agents who are supposed to work strictly in the buyer’s interest, helping him get a fair price on a home as well as avoid pitfalls along the way. Unfortunately, things don’t always unfold so nicely. While buyers may think they’re getting a broker who isn’t commission-hungry, many buyer agents are just that: They usually get about 3 percent, the same amount any broker typically earns when he gets involved with another agent’s listing. “Buyer brokers are sometimes too focused on closing the sale and getting that commission,” says Max Gordon, an Overland Park, Kan.–based real estate broker and attorney, so it’s often in their best interest to see you pay as high a price as possible.

6. “I know zilch about zoning.”

Real estate agents love to suggest big ideas to prospective buyers—say, removing trees to enhance a view, or even squeezing a rental unit out of a roomy garage—meant to happen once the deal is done and they’re out of the picture. But just because it sounds like a good idea doesn’t mean it’s legal. “We had a client who bought a dilapidated house with a beautiful piece of property on a marshland,” recalls New York City–based architect Mary Langan. “The broker told him that he could fix the house up however he wanted, insisting that this was a sleepy little town where nobody would care what he did.” Langan says that the client built a $15,000 shed in the backyard, took down some trees, and had some of the marshland filled in—only to have the town insist he put things back because of environmental zoning regulations.

7. “I won’t let termites—or pesky inspectors—kill a deal.”

If a broker is selling a house, you figure he knows the place pretty intimately—after all, he talks a good game about the new kitchen, the big closets, the heated garage. What you need to worry about, though, are the home’s features that he keeps to himself. Steve VanGrack, former chairman of the Maryland Real Estate Commission, says, “We have had cases where [brokers have] been deceptive about termites and flood damage.”

You’d figure that the home inspector, who comes to check out the place before you close the sale, might notice those things. And he probably will—if he’s not in cahoots with the broker. “Realtors give potential homebuyers lists of home inspectors,” says S. Woody Dawson, a structural inspector and owner of Dawson Inspections in Connecticut. “Those are people who will rubberstamp the house” in return for repeat business. ... “One time I had a broker tell me that unless I told her the results of my inspection—which is confidential between myself and my client—she wouldn’t let me get up on the roof,” Dawson says. “I got out my ladder and told her that unless she was big enough to stop me, I was going up there—she wasn’t big enough.”

8. “I sometimes forget I’m not a lawyer.”

Most states strictly regulate the contracts used in real estate transactions, stipulating the use of boilerplate agreements that offer little room for creativity—but some brokers can’t keep their clauseadding instincts in check. “I see [brokers] pushing the envelope all the time with amendments and addenda,” says Gordon, the Kansas broker and attorney. “They draft language that can have consequences without really understanding it, but they want to keep the sale going.” ...

Whether you’re the buyer or the seller, it’s probably worth the legal fees to get the offer contract reviewed by your lawyer before you sign.

9. “My website is a dead end.”

Considering that 77 percent of house hunters look on the Web, according to the National Association of Realtors, sellers might assume that using a broker with a site can help make a sale happen. But some brokers’ sites are better than others, and you need to look beyond a well designed home page to figure that out.

One common flaw: posting houses that sold long ago. While the mistake can be simple negligence, others think that it’s a bait-and-switch-style ploy. “It brings people in, but it gets them upset when they find out that the property’s [gone],” says Frank D’Ostilio, Jr., sales manager for Coldwell Banker in Newton, Conn. “If a broker has to advertise properties that are already sold, it tells you that he doesn’t have enough inventory to keep his [roster of houses] full.”

Aside from checking up on its prominently placed listings, prospective sellers should also make sure that a site is easy to navigate. And Roger Lautt, a Chicago-based broker with Re/max Exclusive Properties who has his own site, recommends using a broker who “keeps himself relatively high on the search engines.” Lautt says he pays a Webmaster to make sure this happens for his site, which is linked with, Yahoo, and the Re/max site.

10. “You can probably do this without me.”

Brokers like to create a lot of mystique about selling homes, insisting that the process is complicated and best left to professionals. Not so, say homeowners who have sold their homes themselves (about 20 to 25 percent do so each year). William Supple, publisher of the sale-byowner real estate magazine Picket Fence Preview and author of How to Sell Your Own Home, says that “properly priced and advertised, a house sells itself.” Supple adds that sellers should plant a yard sign and post online ads for the property on local sites aligned with print publications (call current advertisers to see if a site is effective).

When it comes to the negotiations between buyers and sellers, Supple thinks brokers and their commissions tend to just get in the way. “Usually, the haggling occurs over a 5 to 10 percent difference,” he says. “And that is more or less the broker’s cut of the sale price. You don’t need him.” Just be sure you price your home well. The way most self-sellers hurt themselves, Supple says, is in setting either an unreasonably high or tragically low asking price. “Hire an independent appraiser for $200,” he suggests, “and he will tell you [the parameters of] what to charge.”

The moral of this story. There are few good brokers. But there are some really good attorneys. Real estate is complex, not for amateurs. For the full SmartMoney article, click here.

The value of regular checkups: You need a regular colonoscopy, regular blood work, regular chest exam, etc. You need to stop eating so much. You need to exercise more. You need to get more rest. I've been inundated with stories from readers about their health problems that could have been caught earlier -- had they had the checkups.

And -- stay out of the woods -- Lyme Disease is rampant.

The Dentist
The dentist pulls out a numbing needle to give the man a shot.

'No way! No needles. I hate needles' the patient said.

The dentist starts to hook up the nitrous oxide and the man objects.

'I can't do the gas thing. The thought of having the gas mask on is suffocating me!'

The dentist then asks the patient if he has any objection to taking a pill.

'No objection,' the patient says. 'I'm fine with pills.'

The dentist returns, 'Here's a Viagra tablet.'

The patient says, 'Wow! I didn't know Viagra worked as a pain killer!'

'It doesn't,' said the dentist, 'but it's going to give you something to hold on to when I pull your tooth.

At the Vet
The black Lab then turns to the yellow lab and asks, "Why are you here?"

The yellow lab says, "I'm a digger. I dig under fences, dig up flowers and shrubs. I dig just for the hell of it. When I'm inside, I dig up the carpets. But I went over the line last night when I dug a great big hole in my owners couch."

"So what are they going to do to you?" the black Lab inquires.

"Looks like I'm losing my nuts too, the dejected yellow Lab says.

The yellow Lab then turns to the black Lab and asks, "Why are you here?"

"I'm a humper," the black Lab says. "I'll hump anything. I'll hump the cat, a pillow, the table, whatever. I have to hump everything I see. Yesterday, my owner had just got out of the shower and was bending down to dry her toes. I just couldn't help myself. I hopped on her back and started hammering away."

The yellow and chocolate Labs exchange a sad glance and says, "So, nuts off for you too, huh?"

The black Lab says ..."No, I'm here to get my nails clipped."

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.