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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, Friday, April 24, 2009. I spoke to the world's smartest investor last night. Ten years ago this July he sold his company and pocketed around $100 million. He stuck 85% into fixed income, mostly triple-tax-free munis. He lives in California where taxes are high. At one stage his equities rose and became 20% of his portfolio. He sold some, cutting them back to 15%. And in early 2008, he sold half of those. So he's basically in fixed income today and he keeps them until maturity. And, for the last ten years, he's outperformed everybody on the planet. (Well almost.)

Why did he go that way, I asked last night?

His answer: "I wanted to preserve my principal and have enough interest to live on. I didn't want to take the risk of having to roll up my sleeves and do it again. Moreover, I wasn't sure I could hit another home run."

He now lives on a farm in California, grows grapes, makes wine and sells it locally. An ideal life you say, except he worries about that Porter Stansberry paragraph (from yesterday's column):

Whether you think we ought to have free health care and drugs for retirees, more military spending than the rest of the world combined, a bankrupt retirement scheme based on government debt, government guarantees for the banks, etc. doesn't matter to me. I'm not interested in pie-in-the-sky ideas about how the world should work. I write about how the world does work. And I can tell you this with 100% accuracy: You cannot support the world's reserve currency when you are the world's largest debtor, when you plan to finance annual deficits exceeding $2 trillion with progressive income taxes and money printing. Our economy is a charade. And when it falls apart, the consequences will be devastating.

We talked last night about gold and diamonds, but were stumped for brilliant ideas. Everything these days seems to be so interlinked -- which is The BiG Lesson from today's mess.

Why commodities will take off -- again. My Australian investment guru, who literally has his nose to the ground, emails me in response to my questions about Australia's rising dollar and its huge commodities/mining business:

My view is simple…..throughout the world global production , exploration and research and development for commodity projects has been cut to almost nothing. Banks are no longer funding projects and it is very difficult to get equity financing as well.

As a result global supply of commodities will decrease between 70-90%.

Demand has also slowed because of slower economies worldwide. Even if we say demand has been cut by 35%....(which is high) then there is still a demand/supply imbalance and as a result I believe commodity prices will increase caused by supply side constraints.

As our Australian $ is very linked to commodity prices, and given my view on commodity prices I believe it will rise, to what and when are to difficult to call. US economy also looks weaker than most. To a large degree Australia's commodities will depend on the US situation and the speed and aggressiveness of any recovery.

Why you can never trust anyone. Brokers sold investors billions of dollars of "cash-equivalent" auction rate securities. In February, that market "locked" up and investors got stuck with an estimated $330 billion to $360 billion of securities. Some of the issuers and some of the brokers have redeemed these securities. But there's over $100 billion still stuck. There are horrendous stories of auction rate securities' owners with medical, rent and food bills they can't pay. Virtually all the redemptions have come because various state attorneys-general have sued or threatened to sue the big financial institutions. Most biggies caved in quickly. Wells Fargo hasn't. It refuses to redeem about $1.5 billion of securities which it peddled as safe as cash. Now the California AG is sueing Wells Fargo. The grounds include deceptive marketing.

Wells Fargo's brokers deceived its clients for the fees they made from peddling stuff -- initial and ongoing fees. It's beyond disgusting. For the entire gruesome story, go to my Auction Rate Preferreds web site.

The latest on South Park's Margaritville episode. I've nagged that everyone watch this episode. It explains everything you and your family need to know about our current financial mess. Viacom, which owns Comedy Central, pulled the episode from YouTube. But...

1. You can watch it now on Amazon for $1.99, or

2. You can watch some of it today for free and in full tomorrow for free on SouthParkStudios.

Funny things happen to me. Zacks Investment Management of Chicago does research and manages money. I don't know how good they are. In fact, I'd never heard of them until yesterday when a nice man called Mark Jay Rafaloff calls and says he wants to see me. He agrees to bring me a bagel and a cup of coffee (three sugars and milk). So with that motivation, I agree to the meeting. He's their regional VP, New York Northeast. He doesn't want to sell me research. Shucks, because apparently the research is good. He wants to manage my money. Lots of it. He shows me some paper with their returns. Zacks has done OK. What endears me is the presentation. Here's Mr. Rafaloff, colorful shirt, pony tail and all.

Zacks has a brochure called "Seven Deadly Investment Sins: How to save your portfolio. Now." The sins:

1. Market timing. You shouldn't.
2. Investing on emotions. Don't.
3. Lack of diversification.
4. Not knowing your time frame.
5. Not understanding the effect of inflation on cash vehicles.
6. Chasing returns. Don't.
7. Procrastination. The worst decision you can make is no decision.

The shirt came from Barneys. My pictures don't do it justice. It's much brighter in real life.

What should Harry do now and why? The IRS tells me they don't have my 2007 return. I sigh, swallow hard, print up 342 pages, bundle it up and mail it certified mail return receipt. A few days later I receive the little green card signed by the IRS. Yesterday I receive a letter from the IRS. It contains:

Dear Taxpayer,
Thank you for reply dated May 05, 2009 (note the date) to our inquiry about Form 1040 for tax period ended Dec. 31, 2007. ...

We searched our records and haven't found your tax return. Please send us a signed copy of your return, including all schedules and attachments. ..

If we do not receive the information or return within 45 days from the date of this letter, we may determine that you're refusing to comply with the law. A taxpayer who intentionally does not file a return can be charged fines and penalties."

Now the only thing in my big envelope to them of May 5, 2009 (????) was my 2007 tax return and a copy of their letter asking for it.

When this happened last time, a sweet reader advised me to always print many copies of my IRS tax returns. This way every time they asked for it -- again -- I'd simply reach into the drawer, grab a copy, shove it into an envelope and mail it. I figure the IRS is in cahoots with some paper manufacturer.

Weekend reading. Both are really good.

I find this funny. I must be truly sick.

A true Southern lady
A very gentle Southern lady was driving across the Savannah River Bridge in Georgia. She saw a young man fixing to jump. She stopped her car, rolled down the window; and said: ' Please don't jump, think of your dear mother and father.'

He replied: "Mom and Dad are both dead; I'm going to jump."

She said: "Well, think of your wife and children."

He replied: "I'm not married and I don't have any kids."

She said: "Well then, think of Robert E. Lee."

He replied: ''Who's Robert E. Lee ?''

She replied: ''Well bless your heart; just go ahead and jump, you dumb ass Yankee !"

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.