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

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9:00 AM EST, Monday, December 15, 2008: Extensive weekend study. Conclusions:

1. Much more housing doom and gloom soon. This time defaulting "Alt-A" and "option ARM" loans. See below.

2. Commercial real estate shoe to drop soon, causing more devastation.

3. Huge inflation coming -- a consequence of government pump-priming our economy to save it. This will lead to massive dollar devaluation.

4. Gold makes sense, since the dollar won't in the long run.

5. Debt -- and too much of it and too easy access to it -- caused the boom, and now the bust. For the best too-much-debt corporate stories, read the Wall Street Journal's ongoing series "The Fallen." Two worth reading: Hard Times for Cement Man and Dark Days for Mall Dynasty.

6. Cash is king for you and for the companies we will invest in. Key is to find solvent companies -- ones that can make it through without borrowing.

7. Companies with huge debt and the need to refinance it imminently will collapse. These are good shorting opportunities. Porter Stansberry suggests shorting D.R. Horton (DHI) and Capital One (COF).

8. There will be more scandals. Remember Todd's mantra, "When in doubt, stay out."

Housing shoes to drop: Sub-prime brought us our present mess. Coming quickly are "Alt-A" and "option ARM" loans. From 60 Minutes last night:

Now the Alt-A and option ARM loans made back in the heyday are starting to reset, causing mortgage payments to go up and homeowners to default.

The sub-prime is / was $1 trillion, the Alt-A is about $1 trillion. And then you have option ARMs on top of that. That's probably another $500 billion to $600 billion on top of that," Whitney Tilson says.

Asked how many of these option ARMs he imagines are going to fail, Tilson says, "Well north of 50 percent. My gut would be 70 percent of these option ARMs will default." ...

In the next four years, eight million families are expected to lose their homes.

For the full 60 Minutes transcript.

How bad is retail? This weekend I bought all my Christmas cards at half off -- two weeks before Christmas. 18 for $4.99 -- an average of 28 cents for the card and the envelope. Don't ask what they looked like. What does a Jew know about Christmas cards?

If it's too good to be true, it is. That's the investment lesson of the massive Madoff $50 billion Ponzi scheme fraud. His investment "record" was too consistent -- good months were up. Bad months were up. From MIT's Andrew Lo:

Madoff’s returns were strikingly consistent month after month, year in and year out. That kind of performance—a nice, smooth line going up no matter what the market does—is a really good sign that you should look more closely.

And then there was the secrecy. His own firm was prime broker. He did his own custodianship, his own accounting, etc. He was even his own "auditor." If you asked questions, you weren't allowed to invest -- which, of course, made you want to invest even more.

SEC investigators spent the weekend trying to figure where all the $49.7 billion went -- that's the $50 billion Madoff admits, less the $300 million remaining. How do you spend $49.7 billion? Figure it this way: $49.7 billion will buy you 16,567 $3 million homes. If you spent one night in each home, that would take you 45 years and five months before you got to stay in the same home twice. If you bought $4 million homes, it would still take you 34 years.

This is the best published Madoff story.


December 13, 2008 -- BERNARD MADOFF is a member in good standing of the Palm Beach Country Club, the exclusive Jewish club on the north end of that island. When I would talk to friends and acquaintances who were members, they often chatted about good old Bernie. The 70-year-old Madoff had been the chairman of the Nasdaq stock exchange.

He was a brilliantly successful money manager who may well have handled the assets of a majority of the 300 members, as well as that of those of a largely Jewish clientele across the eastern United States and a number of wealthy WASPs.

Bernard and Ruth Madoff bought their home on North Lake Way in 1967, and are among the most longstanding members of the club. The Palm Beach Country Club is the ultimate symbol of the Jewish ascendancy.

Unlike the WASP clubs, to join, you have to have made major charitable contributions. You also have to have made your fortune in clean ways. There are no garbage magnates, no slumlords. You have to be a person of character. And there was no one more revered and honored than Bernard Madoff.

Earlier this year I gave a talk at the club about my forthcoming book, "Madness Under the Royal Palms." There were people in the room who are in my book and I avoided talking about them or anything that I thought might irritate or offend. I've been doing this sort of thing for years and I can take a few amusing anecdotes and string them together into something that's not too painful and generally brings smiles if not laughter.

But this afternoon, there was dead silence.

People in Palm Beach sort themselves out into the group in which they belong based largely on how much money they have.

Even the poorest of the islanders seem to have everything, yet joy proves elusive, even for the country club members, because there is always someone richer or better socially connected.

Joy is driving out of your 35,000-square-foot mansion in your Bentley and tooling up to the entrance of Mar-a-Lago for your 15th ball of the season, the valet parkers salivating at the chance to take your car and the prospect of a $20 tip.

Joy is having a wife younger and thinner than any of the other wives at your table. Joy is subtly announced during dinner that your hedge fund scored 33 percent last year, while that of the arrogant son of a bitch across the table with the fat wife scored only 17 percent.

Those with the biggest financial gains generally had their money managed by Madoff. It was an honor having him handle your fortune.

He didn't take just anybody. He turned down all kinds of people, and that made you want to give the man even more of your money. When he took your fortune, he told you that he would tell you nothing about how he achieved his returns. He was a god. He had the Midas touch.

On Thursday, Madoff was arrested and accused of running what probably will prove the greatest Ponzi scheme in history. He may have dissipated as much as $50 billion into nothing. For the elite Jewish world, it is a curse of almost biblical proportion.

I was at a dinner party last night, and one of the guests called on his cellphone, a man whose money Madoff had managed. I know the man, and he is a generous, kind person who recently gave away more than $100 million. He said that both his company's retirement plan and his charitable foundation had been handled by Madoff. He was preparing to fly back to his Boston home to walk among the ruins. It's a story told scores of times yesterday. Bankruptcy. Despair.

There was one largely Jewish charity event last evening.

"It was like the Titanic," one attendee said. "The ship was sinking, and people were crying, 'I lost this and that.' And everybody was drunk. The Titanic was going down, and we might as well carry on."

There is a feeling of incredible shame, embarrassment, of exposure, as if their whole world has been exposed as jerry-built. This evening, the synagogues in Palm Beach will be full. And there will be men and women listening to the truths of a great and ancient faith as they have never listened before.

Laurence Leamer is a columnist living in Palm Beach. His book, "Madness Under the Royal Palms, Love and Death Behind the Gates of Palm Beach," will be published Jan. 27.

Gran Torino is a masterpiece.

Go see it. I'm not going to tell the story, but it's a stunner, with a surprise ending.

TiVo does good. I can't live without it. I can see shows when I want to. I can rewind in the middle of a live TV. That's really useful for interviews on CNBC. The best news is the new TiVo Desktop software which lets me transfer shows from my TiVo hard disk to my PC's external hard disk. This means I now have a library of shows (largely tennis matches) on cheap hard disks. And the best news? There's free software called Direct Show Dump Utility which translates *.TIVO files into *.MPG files, thus allowing you to play them with any video player. Pick it up here.

Differences between men and women:
+ A woman worries about the future until she gets a husband. A man never worries about the future until he gets a wife.

+ A successful man is one who makes more money than his wife can spend. A successful woman is one who can find such a man.

+ To be happy with a man you must understand him a lot and love him a little. To be happy with a woman you must love her a lot and not try to understand her at all.

+ Any married man should forget his mistakes. It's a waste for two people to remember the same things.

+ A woman marries a man expecting to change him and is disappointed. A man marries a woman expecting she won't change and is disappointed.

+ A woman has the last word in any argument. Anything a man says after that is the beginning of a new argument.

+ There are only two times a man doesn't understand a woman -- before marriage and after marriage.

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.