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

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8:30 AM EST Tuesday, December 5, 2006: The best time to take a little off the table is when markets are strong, like now.

Somebody please tell Washington: Australia has almost no national debt. Much debt got paid off with hefty government surpluses in the last 10 years.

In Australia, everybody earning a salary must pay 9% of their salary into his or her own superannuation retirement fund. That 9% is often paid with pretax earnings. Earnings in the fund are taxed at 15%, which is much lower than Australia’s highest marginal tax rate of 47%.

When you’re 55 and retired you can take much of the money out of your super fund tax-free.

There’s presently a proposed law before parliament that says when you’re 60, you can take whatever monies you want out completely tax-free. (The law will pass.)

You can invest your super fund in pretty well anything you want. The investment has to be “prudent.” That includes stocks, bonds, real estate, etc. Most Australians give their super funds to huge professional money managers.

Australia’s sound fiscal policies of the past dozen or so years have accomplished miracles:

+ No hefty debt to pass onto future generations of Australians. (Contrast that with the US with its escalating national debt).

+ Retirement possible at much earlier ages with much more money than the U.S. (Contrast that with the U.S.)

+ Assurance that private monies accruing in super funds will take care of pensions -– thus removing the burden from employers and the Federal Government (contrast that with the U.S.'s social security administration, which is essentially broke).

+ Much greater control over investment vehicles given to individuals. (Contrast that with 401k and IRA plans in the U.S.)
Forced savings and assured growth in investment capital. Australia suddenly has huge monies to invest in its future. (Contrast that with the U.S. where the personal savings rate is basically zero.)

+ Assured stockmarket growth. After all, 9% of salaries pumped in every year, year after year, has an inevitable pleasing result.

+ Huge flow of money into financial organizations, like super fund managers and infrastructure investors. As a result, Australia now has world-class financial skills, and is leading the world in some areas -- e.g. infrastructure investment (bridges, tunnels, toll roads, etc.)

+ Assured country growth. Any outsider who sees these policies (like myself) is likely to send money to Australia. The Australian dollar is firming and is likely to continue firming.

As to investing in this? Any large U.S. broker can buy you Australian shares. I continue to like two mining companies – Kagara Zinc (KZL) and Minara Resources (MRE). Zinifex (ZFX), an erstwhile favorite, is a bit high.

I now am looking at four more Australian stocks – AMP Limited (AMP), Babcock & Brown Infrastructure Group (BBI), Connecteast Group (CEU) and Gindalbie Metals (GBG). You can learn more about these picks at the ASX’s (Australian Stock Exchange’s) web site – click here. It's actually a pretty good site. It lets you run model portfolios, too.

AMP Limited is one of the largest providers of life insurance, superannuation, pensions and general financial services in Australia and New Zealand. Babcock & Brown is a huge diversified financial conglomerate with emphasis on private infrastructure investment (an area Australia leads the world on). Connecteast Group is another infrastructure play -- with an emphasis for now on toll roads. It's new. Its first toll road will open in 2008. Gindalbie Metals wants to become a miner of iron ore. It's also new. It has plenty of iron ore. And I mean plenty. China is the big customer for Australia's iron ore.

For those, like me, who also want something simple, Vanguard Australia has a nice collection of index funds. The Vanguard Index Australian Shares Fund grew -- wait for this -- 25.4% in the year to end October, 2006, 22.4% on average for the past three years and 14.6% for the past five years. All these returns are -- as they so charmily say in Australia -- better than a slap in the belly with a cold fish.. To invest in Australia, go to Vanguard's Australian site. Click here.

P.S. The Australian Government pays $4,000 for each new birth. All you do is to send the Feds a copy of the birth certificate and you get the $4,000 within days. My nephew, Andrew Whitten, an excellent Australian lawyer (if you ever want one), said “The money didn’t pay for the medical bills. But it was appreciated. The baby is doing well, Uncle Harry.

P.P.S. Australia is the only country to have supported and sent troops to every war America has fought in since 1914.

I was born there. It’s a neat place.

Freedom and Justice in Islam: This is not political. It's historical. Bernard Lewis is a professor of Near Eastern Studies at Princeton University and among the most knowledgeable people on that part of the world. I have read several of his books. They're good.

He gave a talk on July 16 during a Hillsdale College cruise in the British Isles. He began:

By common consent among historians, the modern history of the Middle East begins in the year 1798, when the French Revolution arrived in Egypt in the form of a small expeditionary force led by a young general called Napoleon Bonaparte — who conquered and then ruled it for a while with appalling ease. General Bonaparte — he wasn't yet Emperor — proclaimed to the Egyptians that he had come to them on behalf of a French Republic built on the principles of liberty and equality. We know something about the reactions to this proclamation from the extensive literature of the Middle Eastern Arab world. The idea of equality posed no great problem. Equality is very basic in Islamic belief: All true believers are equal. Of course, that still leaves three “inferior” categories of people—slaves, unbelievers and women. But in general, the concept of equality was understood. Islam never developed anything like the caste system of India to the east or the privileged aristocracies of Christian Europe to the west. Equality was something they knew, respected, and in large measure practiced. But liberty was something else.

As used in Arabic at that time, liberty was not a political but a legal term: You were free if you were not a slave. The word liberty was not used as we use it in the Western world, as a metaphor for good government. So the idea of a republic founded on principles of freedom caused some puzzlement. Some years later an Egyptian sheikh — Sheikh Rifa'a Rafi' al-Tahtawi, who went to Paris as chaplain to the first group of Egyptian students sent to Europe — wrote a book about his adventures and explained his discovery of the meaning of freedom. He wrote that when the French talk about freedom they mean what Muslims mean when they talk about justice. By equating freedom with justice, he opened a whole new phase in the political and public discourse of the Arab world, and then, more broadly, the Islamic world. ...

I seriously recommend that you read the entire article. Click here.

Be wary of the questions you ask
Lawyers should never ask a Southern grandma a question if they aren't prepared for the answer.

In a trial, a Southern small-town Prosecuting Attorney called his first witness, a grandmotherly, elderly woman to the Stand. He approached her and asked, "Mrs. Jones, do you know me?"

She responded, "Why, yes, I do know you, Mr. Williams. I've known you since you were a young boy, and frankly, you've been a big disappointment to me. You lie, you cheat on your wife, and you manipulate people and talk about them behind their backs. You think you're a big shot when you haven't the brains to realize you never will amount to anything more than a two-bit paper pusher. Yes, I know you."

The lawyer was stunned! Not knowing what else to do, he pointed across the room and asked, "Mrs. Jones, do you know the defense attorney?" She again replied, "Why, yes, I do. I've known Mr. Bradley since he was a youngster, too. He's lazy, bigoted, and he has a drinking problem. He can't build a normal relationship with anyone and his law practice is one of the worst in the entire state. Not to mention he cheated on his wife with three different women. One of them was your wife. Yes, I know him."

The defense attorney almost died.

The judge asked both counselors to approach the bench and, in a very quiet voice, said, "If either of you idiots asks her if she knows me, I'll send you both to the electric chair."

Our wonderful phone system:
The married daughter calls, "Hello, ma?"

"Darling is anything wrong?"

"Oh Ma, everything's wrong!," she wails. "Both kids are sick. The roof is leaking. The stove isn't working. And I'm expecting six friends for a Tupperware party at lunchtime."

"Darling, don't worry. I'll take a bus into the city. I'll walk the two miles to your apartment. I'll buy food for the Tupperware party, and when I get there I'll take care of the children. I'll even make dinner for Sidney."

"Sidney? Who's Sidney?"

"Sidney, your husband."

"My husband is Isaac. Is this 212-824-7586?"

"No, this is 834-7586."

"Oiy... does this mean you're not coming?"

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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