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8:30 AM Monday, August 8, 2005: Hot areas: real estate, energy and Baidu.com (BIDU), the Chinese Google, which came public on Friday at $27 and then did this as every day trader and their uncle bought, sold and generally amused themselves.



Don't go near this thing. Far too insane. Small float. Crazy valuation.

REITs are tumbling because long-term interest rates are rising and because they have have had a great run. The present wisdom is to sell your REITs.

How to pick stocks, courtesy Warren Buffett:
+ Pay no attention to macroeconomic trends or forecasts, or to people's predictions about the future course of stock prices. Focus on long-term business value -- on the size of the coupons down the road.
+ Stick to stocks within one's "circle of competence." For Buffett, that was often a company with a consumer franchise. But the general rule was true for all: if you didn't understand the business -- be it a newspaper or a software firm -- you couldn't value the stock.
+ Look for managers who treated the shareholders' capital with ownerlike care and thoughtfulness.
+ Study prospects -- and their competitors -- in great detail. Look at raw data, not analysts summaries. Trust your own eyes. One needn't value a business too precisely. A basketball coach doesn't check to see if a prospect is six foot one or six foot two; he looks for seven-footers.
+ The vast majority of stocks would not be compelling either way -- so ignore them. Merrill Lynch had an opinion on every stock. Buffett did not. But when an investor had conviction about a stock, he or she should also show courage -- and buy a ton of it.
+ Buffett did that. After the Cap Cities deal in 1985, he sat for three long years without buying a single common stock. And then, when Coca-Cola fell to attractive levels, he staked a fourth or so of Berkshire's market value on that one stock.

The above is from page 325 of this book, which I continue to read and love. Highly recommended.

For my previous piece on what I learned about investing from this book, click here.

Having a conviction about your investments: Money burns a hole in your pocket. Time weighs heavily. It takes huge discipline not to buy anything for three years, as Buffett did. Saying NO is difficult. I would be a lot richer today if I had said NO more often and invested only in those things I had major conviction about. It's a discipline I'm still training myself on -- saying NO and having conviction. But it's hard -- especially when everyone around you is bragging about how much money they just made on their latest investment. Of course, you have to keep telling yourself that they never tell you of their failed ones.

What happens if what you know is no longer useful? You have to learn a new skill (hence this column) and you have to resist temptation. I spent 28 years in telecom and made a fortune in it. But with the TechWreck of 2000-2002, the industry collapsed. A friend asked should he buy Nortel, once a highflyer (over $80) and now $2.65. My answer is an emphatic NO. I answered:

Nortel used to be among the better managed telecom companies. And it was never managed well. The problem with the telecom industry is buyers. They're cheap, boring, unimaginative and excruciatingly slow. Imagine you're Nortel. Imagine you invent a great central office (also called a switch or exchange) which can potentially deliver great new services. Now you have to sell to the likes to Verizon, SBC and BellSouth, who in turn have to sell the new services to their customers (i.e. you and me). These companies have zero marketing skills. Ask yourself when was the last time the extant phone industry offered you an innovative new service? Even something as simple as having your phones ring simultaneously in your city and country homes? I once tried a magazine directed at phone companies. It lasted a handful of dozen issues before I figured it was going nowhere. Phone company executives are intellectually uncurious. They don't read. They care only about retaining their jobs. There are two ways to keep your job -- don't suggest new ideas internally and don't have your customers complain to the local regulatory agency. And one big complaint is often: Why can't they get the new service you introduced (as a trial) some place else? Solution: Don't introduce new services.

How dumb is Nortel? Earlier this year it agreed to spend $448 million on PEC Solutions Inc. The idea was to find to go into a new growth markets. PEC sells to U.S. government agencies. In Friday's Washington Post, columnist Steven Perlstein argued that Nortel grossly overpaid for PEC - a 38% premium over PEC's stock price at a time when a 10 percent multiple was considered rich. Nortel knows less about investing than I do.

Net Snippets is useful: Here's a way of filing away all those neat things you find surfing the web. It's a piece of software called Net Snippets Go here. Download the free version. It's all you need.

How to speed up Windows -- a little: One of Microsoft's big selling points for Windows XP was that it loads applications much faster. To do this, Windows XP uses what is called the "Prefetch technique," in which the operating system gathers information about each program that you launch and stores that information in the \Windows\Prefetch folder. Then on subsequent restarts, Windows XP uses the information in the Prefetch folder to preload parts of those programs at boot time. Thus, when you launch your application, it appears to load really fast. However, the Prefetch folder can accumulate too much stuff over time. This makes the operating system so busy loading bits and pieces of lots of applications into memory that it ends up slowing down the startup. Here's how clean out the Prefetch folder at any time.

Launch Windows Explorer. Go to the Windows\Prefetch folder. Delete all the files.

More horrible stuff on Saudi: The new king is Abdullah Because he's old -- 80 -- there is already talk of a successor. One name pops up -- Prince Nayef, the interior minister, who's only 69. He's a real charmer: He turned down the idea of women voting in recent elections. He says there is no reason to discuss any need for women to drive. He claimed that the September 11 terrorist attacks on America in 2001 were a Zionist conspiracy. He objects to the U.S. invasion of Iraq. His job as interior minister is to make sure the country runs smoothly. He controls the clergy. One of his favorite clerics, Sheik Salman bin Fahd Al-Oadah, issued this definition of jihad:

The general meaning of jihad is the expenditure of effort in order to establish Allah's religion, call people to it, and establish its authority on the Earth, as well as reform the material circumstances of humanity. . . . The specific meaning of jihad is the military engagement of the unbelievers and those who carry the same legal status as the unbelievers. Jihad, by this meaning, becomes obligatory upon the inhabitants of the countries that come under the occupation of the unbelievers.

I've always love Charades:



The doctor's office and his nosey receptionist:
An 86-year-old man walked into a crowded doctor's waiting room. As he approached the desk, the receptionist said, "Yes sir, what are you seeing the doctor for today?"

"There's something wrong with my dick," he replied.

The receptionist became irritated and said, "You shouldn't come into a crowded doctor's waiting room and say things like that."

"Why not? You asked me what was wrong and I told you," he said.

The receptionist replied, "You've obviously caused some embarrassment in this room full of people. You should have said there is something wrong with your ear or something and then discussed the problem further with the doctor in private."

The man walked out, waited several minutes and then re-entered.

The receptionist smiled smugly and asked, "Yes?"

"There's something wrong with my ear," he stated.

The receptionist nodded approvingly and smiled, knowing he had taken her advice. "And what is wrong with your ear, Sir?"

"I can't piss out of it," the man replied.

The waiting room erupted in laughter.

Recent column highlights:
+ Manhattan Pharmaceuticals: Click here.
+ NovaDel Biosciences appeals. Click here.
+ Hana Biosciences appeals. Click here.
+ All turned on by biotech. Click here.
+ Steve Jobs Commencement Address. The text is available: Click here. The full audio is available. Click here.
+ The March of the Penguins, an exquisite movie. Click here.
+ When to sell your stocks. Click here.

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. That money will help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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