Previous Columns
8:30 AM EST Wednesday, April 26, 2006: Bird dogs. They're key. If your portfolio is to be broad, you need them to find you opportunities in areas you don't have access to -- from syndicated real estate to biotech private placements. Key characteristics of a bird dog:

1. A successful career on Wall Street. He/she understands finance and how to assess business ideas.
2. A realization -- at one stage -- that Wall Street has its limitations. Freedom is great. And there are other saner ways of living and making a living.
3. The bird dog puts his money into every deal he recommends to you. This doesn't mean that the deal will or will not succeed. It means you have an ally when chasing the deal's remnants.

A bird dog brought me a nice biotech deal yesterday. Filling in paperwork, getting my wife to sign on the dotted line and coaxing my bank into making a wire transfer are, sadly, time consuming. I figure the price of a tennis game.

Lessons from tennis: Tennis is like life. If you play half-awake and super-cocky you'll lose. I lost the first set yesterday. If you play awake, concentrate and think, you'll win. I won the second set yesterday. I played no better, just more consistently. That's what counts in tennis -- and life. Skip trying to constantly make winners. Stay consistent. A 12% to 15% return every year really beats out a 60% return one year and a 20% decline the next.

Useful things I learned yesterday:
1. Ask for a deal. The 10-license software I wanted cost $65. I asked how much for two? I got 20 licenses for $80.
2. If your new PC (laptop or desktop) is acting up, go to your maker's web site and download an updated BIOS.
3. Backup. Backup. Backup. Machines still fail. There was absolutely nothing wrong with the Roosevelt Island Tramway except the idiots didn't test the backup generator regularly.
4. Always question experts' opinions. They're usually not wrong -- just overly cautious. You don't have to be that cautious.
5. Mensches reply. Always reply to all your emails.

New Media versus Old Media: Items:
+ Microsoft is buying Massive, which places ads in videogames. 80 employees and rumored price between $200 and $400 million.
+ The New York Times bought About.com for $410 million in early 2005. That was ten times About's revenues. About.com is about "experts" who give you advice on anything and everything -- from cars to religion.
+ News Corp. bought Myspace.com for $580 million. Myspace is a social networking site for kids.
+ Google is now valued at $127 billion -- 70% more than old media Time Warner and 36 times the New York Times.

The money in media today is not in old media --- newspapers, magazines and trade shows. It's Internet-based. It's startup. It's sell-out to big corporations or IPO. There is huge money around for creative startups. One concern: Much of the competition is not-for-profit -- e.g. Craigslist and Wikipedia. The owners of both these sites could sell out for millions if they ever decided to follow Reverend Ike's philosophy -- namely that the best thing you can for the poor is not to be one of them.

I once sold an old media company -- magazines, books and trade shows -- to an old media company. That was in September, 1997. Now I'd love to create a new media company. But my tiny brain has, so far, let me down. I wonder if we could do something in the field of posting investment opportunities -- entrepreneurs looking for money. Mmmm. I must check this idea out with a lawyer today. Would we run foul of the SEC?

Meantime, selling newspaper stocks short (my tired old theme) still makes huge sense. From the latest issue of the Economist:

By common consent, the newspaper industry is in a perfect storm. In America, circulation has been gradually but steadily falling since 1990, according to Editor & Publisher, a trade journal. The trend in other countries is much the same. Most young people nowadays do not read a daily newspaper at all. To make matters worse (and to devalue the argument that society must preserve newspapers as “trusted” sources of news), the industry has been through a string of scandals, the most ignominious being the New York Times' fiasco with Jayson Blair, one of its reporters who simply made up his stories. According to The State of the News Media, an annual American research project, the industry has laid off more than 3,500 newsroom professionals since 2000, about 7% of the total. In hard-hit Philadelphia, for instance, the number of reporters covering the metropolitan area is down to 220, half the 1980 figure.

Trends in advertising—and particularly classifieds, an inherently user-generated medium—are even bleaker. Whenever Craigslist.org, a do-it-yourself online bulletin board, enters a new city, local papers hear that proverbial sucking sound. EBay, the world's biggest auction site (which also owns a stake in Craigslist), already works like a global trading place. Last November, Google launched “Google Base”, a free service that allows users to upload anything—including classifieds—free of charge. These are consummate trading and advertising machines “for which journalism would be a ridiculous distraction”, says Mr. Gillmor, who now works as an industry researcher. “That's hard to compete with if your main cost center is journalism.”

Two bitter ironies serve to deepen the gloom. The first is that advertisers have been even slower to adjust than the newspapers themselves. After an admittedly delayed start, the papers are now getting better at helping their readers to move to their online offerings, so their customers as a whole are not actually defecting. But advertisers do not value the two media in the same way. Lauren Rich Fine, a financial analyst of newspapers, estimates that for every advertising dollar that a newspaper gets for a print reader, it receives only 20-30 cents for his online equivalent. Even though online advertising is growing by 30% or more a year, this is from a tiny base. Pip Coburn, an investment strategist, estimates that even newspapers such as the New York Times, which are widely read online, get only 5-10% of their revenues from the web.

The lesson in the Computer Associates Fraud Case: Think Cockroach Theory. On the first sign of the smallest trouble -- especially relating to accounting or auditing problems, dump the stock. Sanjay Kumar, the former chief executive of Computer Associates, and Stephen Richards, the company's former top salesman, are going to jail for a long long time. They confessed to a wide-ranging conspiracy to inflate the company's sales in 1999 and 2000 and interfere with the subsequent federal inquiry.

Fact is public company CEOs are under huge pressure from Wall Street to maintain consistent earnings increases. Sadly, the real world doesn't work that way. One day the CEO says to his CFO, "I need a little help." And it's all downhill from there on.

The men repeatedly lied to their own lawyers and to federal investigators, according to the indictment, which also said that Mr. Kumar even authorized paying $3.7 million to buy the silence of a potential witness.

CA shares closed yesterday at $25.51, down 25 cents. The price is down about two-thirds from its high of $75 in January 2000. The company reported $3.5 billion in sales last year, compared with $6.1 billion in 2000.

Where the money now is. Hint, it's not in China. From the Economist:

PLENTY of Americans blame unfair competition from Asia, and especially China, for their country's gigantic current-account deficit. Yet the group of countries with the world's biggest current-account surpluses is no longer emerging Asia, but exporters of oil. As the price of their chief resource has climbed—this week it hit a new nominal record price of more than $70 a barrel—these economies have enjoyed a huge windfall. From an American point of view, the rise in oil prices has explained half of the widening of the current-account deficit since 2003, a bigger share than that accounted for by China.

A timely chapter in the International Monetary Fund's latest World Economic Outlook, published this week, explores the implications of these gushing petrodollars for the world's current-account imbalances. Thanks to higher prices and increased production, the revenues of oil exporters—members of the Organization of Petroleum Exporting Countries (OPEC), plus Russia and Norway and a few others—reached almost $800 billion in 2005. Adjusted for inflation, this beats the previous peak in 1980; and in the past three years real oil revenues have risen by almost twice as much as in 1973-76 or 1978-81. In relation to world GDP, however, revenues have increased by only a little more than during those earlier price shocks.

The oil exporters' current-account surpluses reached almost $400 billion last year, more than four times the total for 2002, and are forecast to rise to $480 billion in 2006. The combined surpluses of China and other emerging Asian economies were only $240 billion last year. Oil exporters' surpluses are also much bigger relative to the size of their economies, averaging 18% of GDP last year, twice as much as at the previous peak in 1980, and much more than China's surplus of 7% of GDP.

Petrodollars can be recycled to oil-importing economies in one of two ways. Either oil exporters can import more goods and services, or they can invest their windfalls in global capital markets, thereby financing the current-account deficits of America and other oil importers. Whether the exporters spend or save their revenues determines the path of global imbalances, including America's vast deficit.

Jerusalem's Wailing Wall:

In Jerusalem a female CNN journalist heard about a very old Jewish man who had been going to the Wailing Wall to pray, twice a day, every day, for a long, long time.

She went to the Wailing Wall and there he was walking slowly up to the holy site. She watched him pray and after about forty five minutes when he turned to leave she approached him for an interview.

"I'm Rebecca Smith from CNN. Sir, how long have you been coming to the Wailing Wall and praying?"

"For about sixty years" the old man replied.

"Sixty years! That's amazing! What do you pray for?"

"I pray for peace between the Muslims and the Jews. I pray for all the hatred to stop and I pray for all our children to grow up in safety and friendship."

"How do you feel after doing this for sixty years?"

The old man replied "Like I'm talking to a stone wall."

Harry Newton

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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