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8:30 AM EST, Friday, April 20: Two areas interest this morning: oil drilling / service and uranium:

+ Dril-Quip (DRQ) makes stuff oil search companies use in their undersea / deepwater drilling. Sales and earnings have exploded. I like Drip-Quip. It's a company that makes things you can see and touch -- American manufacturing at its best. It keeps on innovating and innovating.

If you believe, as I do, that more and more exploration and drilling will be done offshore, you have to believe it will be done in deepwater areas in which the company specializes.

+ Uranium. This morning a reader, Jon Giberson emailed me:

It looks like your observations on Uranium are right on. Pinetree Capital (PNP.TO) and Mega Uranium (MGA.V) are making some nice moves up. Both are on Canadian exchange. Pinetree split two for one and went up almost 50%. Mega is supposed to be moving up soon.

The story of Qwest: Qwest (Q) was founded in the mid-1990s by railroad magnate and superb investor Philip Anschutz, who in 1997 chose Joe Nacchio, who had worked his way up the ranks of the old AT&T Corp., as CEO to take the business public. Qwest soon took over U S West, a baby Bell, and set out to build an expensive fiber-optic network to carry Internet traffic worldwide. But other telecom companies did the same, and when demand didn't match everyone's dreams, the telecom bubble burst, losing several trillion dollars for the American public.

Wall Street wanted success, however. It had pumped billions into telecom. The pressure on Nacchio to produce continuing great numbers was immense. So, he kept putting out bullish financial reports, though his senior people told him they were "bullshit." Yesterday a juror convicted Nacchio of insider trading. The claim: He knew things were awful, told the public things were good (when they weren't) and meantime sold $100 million of his own stock at prices much higher than they would have been -- had the investing public known the truth. This is what subsequently happened:

This is Joe Nacchio. He was pig-headed, arrogant and sports an ego larger than life, but now could spend the rest of his life in jail. He came from AT&T and seriously lacked imagination -- like most of them.

Nacchio isn't the first CEO to issue misleading financial statements. And he won't be the last. You have to apply the "Test of Sanity" to anything you hear out of the mouths of CEOs. Does what he/she say make sense within the framework of where the rest of the industry is going?

Meantime, Qwest itself has become a sound, but boring phone company now managed by competent, new ,boring management team that is slowly fixing the company. I have recommended the stock for some months and it's done well for us:


But, I think it may be time to move on. Sales are flat, innovation is sleepy and I can see few opportunities to pull more costs out of the company. After all, it's a phone company!

For emergency, use SMS: The BIG lesson with the shootings at Virginia Tech is that every organization (including yours) needs disaster communications -- a way to tell everyone what's happening. Emails don't work. They're not fast enough. But SMS on cell phones is. Everyone these days has a cell phone. There is plenty of simple SMS software that will broadcast a short SMS message to thousands of people instantly. Please set this up in your organization. It may save some lives.

Don't cry over the water my daughter spilled on her laptop: She turned it off, drained the water, turned it over, let it dry for a day. Then bingo, turned it on. It worked. My daughter is a genius. A reader is not. When he spilled stuff on his laptop, he used a hairdryer. Sadly, he melted one of the keys... The good news is that most laptop keyboards can be easily replaced for remarkably little money. I wear out keyboards typing this column. Every six months or so I replace them at a company called SparePartsWarehouse.

Meantime, Steve Fox, another reader, emails:

If you have a convection oven, put it in on dehydrate setting at 100 degrees for a couple of hours. I dropped an electric drill overboard three years ago, rinsed it off with fresh water and stuck it in the oven. It's still working.

Improving the Average of the Average Investor. Burton Malkiel wrote the book "A Random Walk Down Wall Street." He recently wrote a review of John Bogle's new book in the Wall Street Journal.

Readers of the Little Book Big Profits Series of concise investment guides must be thoroughly confused. The first guide, Joel Greenblatt's "The Little Book That Beats the Market," tells readers that there is a simple "magic formula" that enables ordinary investors to beat both the market and professional investment managers by a wide margin. If you buy stocks with low price-earnings multiples and high returns on invested capital, Mr. Greenblatt argues, profits will be automatic. In the second book in the series, "The Little Book of Value Investing," Christopher H. Browne presents a more complicated set of rules. In a chapter titled "Send Your Stocks to the Mayo Clinic," Mr. Browne presents a 16-point checklist to examine a company's suitability for investment. Two of his rules: "buy stocks like steaks," i.e., when they are on sale and have fallen in price; and "examine what the insiders are doing."

Now comes John C. Bogle in the third Little Book who says that all of this is nonsense. The surest way to gain above-average returns is through a low-cost, low-turnover index fund that simply buys and holds essentially all the stocks traded in the market. Well, let me set the Journal's readers straight. Mr. Bogle is right. If you want one simple Little Book to tell you how to invest, "The Little Book of Common Sense Investing" is the one to get.

For the financial junkies who have read earlier Bogle books and op-ed pieces, or seen him on the lecture circuit and on TV, there will be little new here. But for everyone else, a short book has the advantage of offering Mr. Bogle's excellent advice in a concise and accessible manner. Throughout, Mr. Bogle invokes other experts to corroborate the points he makes. "If you don't believe me," he tells us time and again, then "take it from" a series of investment icons, ranging from the "father" of value investing, Benjamin Graham, to investment luminaries like David Swenson and Warren Buffett.

Chapter 5, "The Grand Illusion," is especially valuable. While the market as a whole has produced a generous 10% return over the long pull, Mr. Bogle notes, the average investor makes substantially less. The average investor tends to buy into the market at bull market peaks (when everybody else is optimistic) and to sell at market bottoms, when everyone thinks the sky is falling. The average investor also buys the wrong types of equity mutual funds. In early 2000, during the height of the dot-com craze, investors piled into high-tech funds and sold their value funds. The tech funds collapsed and the value funds turned out to be the star performers of the early 2000s.

When you then add the high fees and turnover costs of actively managed mutual funds and substantial tax penalties (if the funds are held in taxable accounts), it is easy to see the "grand illusion" that Mr. Bogle is referring to. The average investor earns substantially less than the market return. Mr. Bogle shows you how to avoid the psychological biases that bedevil ordinary investors and how to obtain your fair share of stock-market returns.

My only quibble is that Mr. Bogle takes an overly negative position on Exchange Trade Funds (ETFs) -- index funds that trade as stocks continuously during the day. He objects that they are designed for trading rather than investing and that their proliferation into a myriad of industry sectors and regions of the world is the antithesis of broad-based, buy-and-hold index investing. He worries that investors will do themselves great harm by attempting to time the market and to concentrate their portfolios in the "hottest" market sectors.

To be sure, ETFs can be misused and some have high expense ratios. Mr. Bogle is right that picking the right sectors and exactly the right time to buy and sell is a loser's game. But ETFs allow investors to diversify their investments by, for example, easily accessing real-estate markets as well as underrepresented sectors of the economy, such as emerging-market stocks and commodity producers.

ETFs are also inherently more tax efficient than indexed mutual funds and can be run at lower costs. Within a mutual fund, investors who believe that they can time markets make transactions and create trading costs that hurt long-term investors. Within an ETF, commissions are paid by the ETF's particular buyers and sellers; such transactions do not affect the fund itself. To the extent that the ETF sells any securities, it can eliminate their low-tax-basis stock without incurring any tax liability for the holders of the ETF. Stock sales by ETFs are not considered taxable events.

At Vanguard, Mr. Bogle created the first index fund (the 500 Index Fund) in 1976, and for this he deserves enormous credit and the thanks of countless investors. Vanguard now offers an ETF-share class of that fund. Market timers can buy and sell the ETF-share class without creating costs for long-term shareholders of the mutual fund. Moreover, when sales of stocks are made for the ETF shares, Vanguard can purge the fund of its low-basis stocks.

Mr. Bogle complains in "Common Sense Investing" that ETFs are inimical to the basic purpose of indexing. He laments: "What have they done to my song, ma? They've turned it upside down." In certain respects, though, the ETF-class of indexed shares has made his song even better.

MOSCOW -- Russia plans to build the world's longest tunnel under the Bering Strait to Alaska as part of a $65 billion project to supply the United States with oil, natural gas and electricity from Siberia.

The project, which Russia is coordinating with the United States and Canada, would take 10 to 15 years to complete, Viktor Razbegin, deputy head of industrial research at the Russian Economy Ministry, told reporters at a briefing here yesterday.

A partnership of state organizations and private companies would build and control the route, known as TKM-World Link, he said.
A planned 3,700-mile transportation corridor from Siberia into the United States will feed into the tunnel, which at 64 miles will be more than twice as long as the underwater section of the Channel Tunnel between Britain and France, according to the plan. The tunnel would run in three sections to link the two islands in the Bering Strait between Russia and the United States.

"This will be a business project, not a political one," said Maxim Bystrov, deputy head of Russia's agency for special economic zones. Russian officials will formally present the plan to the U.S. and Canadian governments next week, Mr. Razbegin said.
The Bering Strait tunnel will cost an estimated $10 billion to $12 billion. The rest of the investment will be spent on the entire transportation corridor, according to the plan.

"The project is a monster," said Yevgeny Nadorshin, chief economist with Trust Investment Bank in Moscow. "The Chinese are crying out for our commodities and willing to finance the transport links, and we're sending oil to Alaska. What, Alaska doesn't have oil?"

Czar Nicholas II, Russia's last emperor, was the first Russian leader to approve a plan for a tunnel under the Bering Strait, in 1905, some 38 years after his grandfather sold Alaska to America for $7.2 million. World War I ended the project.

The planned undersea tunnel would contain a high-speed railway, highway and pipelines, as well as power lines and fiber-optic cables, according to TKM-World Link.

Investors in the public-private partnership include OAO Russian Railways, national utility OAO Unified Energy System and pipeline operator OAO Transneft, according to a statement that was handed out at yesterday's press briefing and bore the companies' logos.

Russia and the United States could each eventually take 25 percent stakes in the project, Mr. Razbegin said, adding that other shareholders could include private investors and international finance agencies.

"The governments will act as guarantors for private money," he said.

World Link will save North America and Russia $20 billion a year on electricity costs, said Vasily Zubakin, deputy chief executive officer of OAO Hydro OGK, Unified Energy's hydropower unit and a potential investor in the project.

"It's cheaper to transport electricity east, and with our unique tidal resources, the potential is real," Mr. Zubakin said. Hydro OGK plans by 2020 to build the Tugurskaya and Pendzhinskaya tidal-power plants, which would each produce as much as 10 gigawatts of electricity by capturing the energy of moving water in tides and currents in the Okhotsk Sea close to Sakhalin Island.

The project envisions building high-voltage power lines to supply the new rail links and also export electricity to North America.
Russian Railways is working on the rail route from Pravaya Lena, south of Yakutsk in the Sakha republic, to Uelen on the Bering Strait. The 2,170-mile link could carry commodities from eastern Siberia and Sakha to North American markets, said Artur Alexeyev, Sakha's vice president.

The two eastern regions hold most of Russia's metal and mineral reserves "and yet only 1.5 percent of it is developed due to lack of infrastructure and tough conditions," Mr. Alexeyev said.

Rail links in Russia and the United States, where a 1,200-mile stretch from Angora to Fort Nelson in Canada would continue the route, would cost up to $15 billion, Mr. Razbegin said. With projected cargo traffic of as much as 100 million tons a year, the investment in the rail section could be recouped in 20 years.

"The transit link is that string on which all our industrial cluster projects could hang," Mr. Zubakin said.

Japan, China and South Korea have expressed interest in the project, with Japanese companies offering to dig the tunnel under the Bering Strait for $60 million per kilometer -- half the projected price, Mr. Razbegin said.
Skeptics are wary, however.

"This will certainly help to develop Siberia and the Far East, but better port infrastructure would do that too and not cost $65 billion," said Mr. Nadorshin of Trust Investment Bank. "For all we know, the U.S. doesn't want to make Alaska a transport hub."

There is a right way and a wrong way:


I know it's silly. I can't stop laughing.

Jewish thinking:
Is it okay to take Viagra on Shabbat?

There are two differing schools of thought on whether you can take Viagra on Shabbat: Beit Shammai forbids the ingestion of Viagra on Shabbat, lest one violates the infraction of erecting a structure("boneh"). Beit Hillel says do not read it as "boneh" but as "boner", and permits the ingestion of Viagra before sundown so long as the Kabbalat Shabbat takes less than one half hour to complete, the kids are asleep, and your wife doesn't have a headache.

What bracha (blessing) does one say before taking the Viagra pill?

There is a choice of four blessings:

1. Borei p'ri ha-eitz - blessing over the fruit of the tree;

2. Boruch Atah HaShem zokeif k'fuffim - straightens those who are bent;

3. Ya'aleh v'yavo - arise and come;

4. Boruch Atah HaShem mechayei hameitim - raises the dead.

There is a follow up to the above... Yes, the anti-impotence drug has been found to contain a tiny amount of animal matter, rendering it - one would think - treif (i.e. non-kosher). But, Rabbi Abraham Blumenkrantz, an American Kashrut expert, says that, as a medication that adds pleasure to the Sabbath (not to mention the rest of the week), it is permissible.

But it is banned during Pesach -- along with all other agents causing things to rise.

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. Please note I'm not suggesting you do. That money, if there is any, may help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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