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Harry Newton's In Search of The Perfect Investment Technology Investor. Harry Newton

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9:00 AM EST, Thursday, June 18, 2009. It's horrendous out there, my friends tell me. This economy truly sucks. Their sales are way down. 70% of our economy is consumer spending. Right now, the consumer isn't spending.

You can see that in all those vacant retail stores. You can read about increasing vacancies in my real estate syndications, with many failing to meet their budgeted NOI (net operating income).

You can see it in all the "Sale" signs gracing retailer windows. In one place, "buy one suit, get two for free." Yesterday, Eddie Bauer went Chapter 11.

All this spells misery for the manufacturers who supply the retailers. The declining consumer sentiment will seriously hurt the stockmarket. Time to look for shorts.

Yesterday, I wrote "I suspect --- for many reasons -- that the rally which began on March 9 has run its course. It's time to be out, if you were ever in."

Today Bloomberg writes:

June 18 (Bloomberg) -- European and emerging-market stocks fell for the fifth day, the longest losing streak since January, as an unexpected drop in U.K. retail sales and downgrades of U.S. banks by Standard & Poor’s fanned concern the global economic recovery will falter.

Yesterday, Richard Russell echoed my sentiments. He wrote:

June 17, 2009 -- I continue to grade the primary trend of the stock market and the economy as bearish. In order for a counter-trend rally in a bear market to be sustained, it requires steady or rising buying power plus short covering.

I just went over my figures -- Lowry's Buying Power Index has been declining steadily since May 8. At yesterday's market close, Lowry's Buying Power Index (demand) was only 24 points higher than it was at the March 9 lows. Furthermore, volume is drying up. This is extremely negative action. Whenever buying power contracts during a rally in a bear market, the prevailing primary bear market forces immediately take over. For that reason, unless the trend of declining buying power soon halts and reverses, I believe that the March 9 lows will be attacked and violated.

Consequently, I advise my subscribers to assume a highly defensive position in their portfolios. If you are still loaded with stocks, cut back and get ready for the "hard rain." What we're seeing now is just the early drizzle.

Below we see a daily chart of the broad NYSE Index. Note how the volume has fallen off since May. And over the last few days, the NYSE Index has fallen below its rising trendline.

Gold -- is in a corrective mode. I've drawn two trendlines. The longer one is shallower than the shorter one. Primary bull movements tend to be slow and dragging, while corrections against the primary bull trend tend to be rapid and violent. Note that the latest corrective move has erased almost half the rise that began in May within a period of only seven days.

Cross your fingers for Iran: What's happening today in Iran is exactly what happened in 1979 when the Shah fell. There are marches. Some marchers get killed. The next day they hold "mourning" marches. They're bigger. Then more crackdowns and more deaths. Then bigger marches the following day. Cracks are appearing among Iran's leaders, as some encourage the demonstrations and increasingly question the election.

Pray for Iran. We may actually get a regime who hates us less. I worry about their nukes I worry about Israel's response. I worry about horrible consequences for yet another Mideast War.

I've spent time in Iran. The Iranian people are truly wonderful. They want nothing more than we want -- to work hard, to live a nice lifestyle and to live in peace. They do not want the insanity of the present regime.

Mercedes adds major idiocy to technology. What could be more friendly than a Start button atop your gear shifter? Get in your car. Push the button and go. Brilliant. Many new Mercedes cars have this wonderful new feature.

No more fumbling for keys. Your Mercedes "proximity" key stays in your pocket or purse and wirelessly tells your car you're kosher to drive it. There's only one problem. It doesn't work well. And when it doesn't, there's absolutely nothing you can do. You have to flatbed your new Mercedes to the nearest dealer, where he will reprogram one of your Mercedes' many unreliable computers. And hopefully, it will, once again, start.

I got the story about unreliable Start buttons from our local New York City underground parking garage. They related (with great mirth) many stories of their customers' cars being flatbedded to Mercedes. I had asked about Mercedes problems because my wife's Mercedes had just been flatbedded out of the garage to the dealership. It had a busted front strut. Mercedes said my wife drove it over a vicious pothole. When I pointed out that the car had been sitting in the parking lot for the past week, they shrugged their shoulders, said "Shit happens" and presented me with a $2,581 bill.

Mercedes quality has been on the decline. It is the most unreliable luxury car being produced today. Our Mercedes has done about 65,000 miles and has already had three batteries, three sets of tires, one battery control module ($900), a new transmission, a new cooling system, sundry hoses and God knows what else.

But the worst aspect is when we go to trade it in on a new one (my wife still loves Mercedes), we will get virtually nothing. This brings up the one lesson from all this misery: If you must, buy a secondhand Mercedes. They're ultra-cheap. But check the service record first.

Please be careful. I am not ancient nor frail. Nor are my friends and readers. But many of them have recently fallen over, broken something, hurt themselves and/or gotten strangely sick. I implore all my readers -- You are no longer young. Please be careful. Take that extra moment to be sure. Get sufficient rest. Take naps. Eat well in moderation. Get plenty of exercise. And stay out of the woods. Lyme Disease sucks.

China's bubble is bursting. From Bloomberg yesterday:

June 17 (Bloomberg) -- Rallies in commodity prices and mining-company shares stem from a “bubble of belief” in China’s economy that is likely to burst, according to Albert Edwards, a strategist at Societe Generale.

“I believe we will look back on the Chinese economic miracle as the sickest joke yet played on investors,” Edwards wrote yesterday in a report. To support his argument, he cited falling earnings at the country’s industrial companies.

On reading Bloomberg, my friend Chris Wyser-Pratte wrote me:

China is a Potemkin Village. The water is foul, the air is foul, anything that swims or flies in or breathes either is foul. There is virtually no unused arable land, no clean water to irrigate it with if there were. The food products are poisoned and so are the toys. There are empty office buildings at the end of highways to nowhere because huge infrastructure development is unsustainable, they have to import rice, and if you make a very large bad loan not to a company controlled by a member of the Politburo, you disappear. Make bad currency trades and you disappear. Get convicted of a commercial crime (easy to do) and you get hanged. Protest in the square and you get shot.

When it implodes, it's going to be with a vengeance, and will take trillions of Western investors' money with it.

Military wisdom
+ Any ship can be a minesweeper. Once.

+ If the enemy is in range, so are you. - Infantry Journal

+ It is generally inadvisable to eject directly over the area you just bombed. - U.S. Air Force Manual

+ Whoever said the pen is mightier than the sword obviously never encountered automatic weapons. - General MacArthur

+ Tracers work both ways.- U.S. Army Ordnance

+ Never tell the Platoon Sergeant you have nothing to do. - Unknown Marine Recruit

+ If you see a bomb technician running, Keep up with him. - USAF Ammo Troop

+ The only time you have too much fuel is when you're on fire.

+ When one engine fails on a twin-engine airplane you always have enough power left to get you to the scene of the crash.

+ The three most famous last words in aviation are:

"Why is it doing that?"
"Where are we?"
And, "Oh Shit!"

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.