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8:30 AM Tuesday, February 14, 2006: Let's talk about the economy. You and I are doing just fine. We have jobs. (Unemployment is way down.) We have money. (Liquidity is way up.) Our customers and clients are still buying. (The economy is chugging along.) Our taxes are low (especially our capital gains). We can still borrow cheaply (though a tinge more than a year ago.) The value of our houses have risen. And our stockmarket investments were -- at least until the last two weeks -- doing just fine.

That's my personal side. It feels good.

Then there's my "professional" side. I once graduated in economics. Everything I learned in school seems to have gone awry in the real world. My biggest "professional" concerns are:

1. Our huge (and continuing) trade deficit.
2. Our huge (and continuing) government spending deficit.
3. Our ultra-low personal savings -- last year less than zero.

Many economists are now using the word "unsustainable."

Eventually the trade deficit will have to come down, the housing boom (the key element of our present buoyancy) will end, and both American consumers and the U.S. government will have to start living within their means.

Soft landing or hard landing?

It's out of our hands. Our trade and government deficits are funded by China and Japan sending us money and buying our government's bonds.

Will they stop buying? Many people argue that they can't, since their buying gives them two benefits:

1. It gives them somewhere safe to put their money. Nothing is safer than U.S. Treasuries.
2. It keeps the value of their currency low (and our dollar high). This way we can afford to keep buying their stuff and they can keep their people employed.

If they keep sending us their money to buy our government's bonds, we can keep bingeing. If they don't, some "experts" argue that, to eliminate the trade deficit, the dollar will fall 30 percent.

Personally, I thought this bubble would have burst years ago. It hasn't. Every economist has been wrong!

Perhaps the best strategy is to simply to ignore all the "noise" in the Wall Street Journal, the New York Times and on BubbleVision? What can you do? What should you do?

1. Play it conservatively.
2. Limit your borrowings. Don't buy stocks on margin. Don't borrow excessively against your real estate.
3. Keep your investments diverse.
4. Keep enough cash on cash to finance at least six months of your present life style.

Today, Saint Valentine's Day: In the Middle Ages, the belief that birds and rabbits chose their mates on St. Valentine's Day led to the idea that boys and girls would do the same. St. Valentine, a Roman, was martyred for refusing to give up Christianity. Legend has it that St. Valentine left a farewell note for the jailer's daughter, who had become his friend, and signed it "From Your Valentine". In the United States, commercial valentines were introduced in the 1800s. Now, many Manhattan restaurants require you to pay hundreds of dollars if you cancel your reservation tonight.

How did you guess?
Three old mischievous grandmas were sitting on a bench outside a nursing home. About then an old grandpa walked by, and one of the old grandmas yelled out saying, "We bet we can tell exactly how old you are.

"The old man said, "There ain't no way you can guess it, you old fools.

"One of the ornery grandmas said, "Sure we can! Just drop your under shorts and we can tell your exact age."

Embarrassed just a little, he dropped his drawers. The grandmas stared at him for a while, asked him to turn around a couple of times, asked him to jump up and down for a little while and then they all piped up and said, "You're 84 years old!"

"How in the world did you guess?" he asked.

The grandmas, snickered and laughed. Slapping their knees and grinning from ear to ear, all three happily yelled in unison, "Because you told us yesterday."

Being kosher in London:
An American Jew was shopping on Regent Street in London. He entered a posh gourmet food store. A salesman in a morning coat with tie and tails approached. "May I be of help to you, sir?"

"Yes. I'd like a pound of lox."

"Sorry, sir, do you mean smoked salmon?"

"Okay, a pound of smoked salmon."

"Anything else?"

"Yes, a dozen blintzes."

"I believe you mean crepes.

"Okay, a dozen crepes."

"Anything else?"

"Yes. A pound of chopped liver."

"You are probably referring to pate."

"Okay, a pound of pate, and could you deliver this Saturday?"

"Sorry, sir, we don't schlep that chazzerai on Shabbos."

Recent column highlights:
+ Munich, the movie. A must-see. Click here.
+ Identity Theft precautions. Click here.
+ Dumb reasons we hold losing stocks. Click here.
+ How my private equity fund is doing. Click here.
+ Blackstone private equity funds. Click here.
+ 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 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. 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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