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8:30 AM EST, Friday, February 16, 2007: This week, I've been inundated with startups. Neat stuff. Neat ideas. Neat inventions. But, oih, so little attention to marketing. The 1-in-a-1000 rule applies. You kiss 1000, before you find ten princes you sleep with (i.e. invest in). And, in the end, only one prince makes it. That's the gruesome statistics. They don't lie.

InSite Vision (ISV) finally did its deal. It announced a patent (and hence marketing) agreement with Pfizer. ISV's stock has appreciated significantly since I first recommended it. You should have a handsome long-term capital gain. Take the money and run. Thank you Harry.

Housing -- Part 1: From today's New York Times:

Prices for single-family homes fell in more than half of the nation’s 149 biggest metropolitan areas in the last three months of 2006, according to data released yesterday by a trade group for real estate agents.

The figures from the National Association of Realtors show that the housing market weakened noticeably in many parts of the country at the end of last year and indicate that suggestions by some industry officials that the market has hit bottom could be premature. In the previous quarter, prices fell in one-third of all metropolitan areas.

The biggest price declines were concentrated primarily in two kinds of cities: the formerly booming markets along the coasts and in the Southwest, and in Midwest and Northeast cities hurting from the loss of manufacturing jobs. The biggest declines, for instance, were in Florida — Sarasota-Bradenton (down 18 percent), Palm Bay-Melbourne (17 percent) and Cape Coral-Fort Myers (11.7 percent). The declines in prices were especially steep for condominiums. ...

Nationally, the median price of single-family homes fell 2.7 percent, to $219,300.

Atlantic City and Salt Lake City topped the list of metropolitan regions where prices increased in the fourth quarter. Broadly speaking, prices were strongest in the Northwest and in some parts of the South.

At the same time, the number of homes sold fell in 40 states and in the District of Columbia. Nevada and Florida each reported declines of more than 30 percent; in Arizona, Virginia and the District of Columbia, sales fell by more than 20 percent. Nationwide, sales fell 10.1 percent in the fourth quarter from the same period in 2005, to an annual pace of 6.24 million.

Sales increased in six states — Alaska, Mississippi, Kentucky, Texas, Arkansas and Illinois — and were flat in Utah. The Realtors did not have enough data on sales in Idaho, New Hampshire and Vermont.

Housing -- part 2. What really happened to housing? From deep down in the trenches, Debbie Warren, an erstwhile successful mortgage broker and now manager of mortgage brokers, reader and long-time friend, reports:

Actually the housing boom happened because the average Joe sold his stocks and investments and bought investment properties ("they're not making any more land, Joe!!"). Joe was counting on the momentum of the upward market to make a fast buck on flipping the properties. Everyone was doing it. Then suddenly in December 2005, nobody had money to buy more and the lights went off. Now Joe's retirement funds are stuck in real estate where values are declining, and he has a big mortgage with interest.

Some of my realtor friends were holding mortgages on 30 investment properties with no tenant in any of them. They were no longer able to afford to wait out the market and the number of houses on the market went through the roof. Time to sell went from 8 days to a year and a half in less than 2 months here (Southern Florida) where I am.

We currently have an inventory of over 3 years. Salaries don't support the income to purchase the homes even as primary residences, and 40% of the homes in this county (what's its name?) were owned by investors. Currently, this area is one of the worst in the country because it had the largest gains in the country when the values were appreciating so rapidly. It's still quite depressing to see.

One realtor's office had a grand opening about a week ago (they moved) to right in front of WalMart, at the major highway, lots of press coverage and one of the best areas to live, and the next 2 days brought in ZERO walk-in or phone call traffic. You want to talk about sobering. Those guys are looking at moonlighting as MonaVie juice salesmen or taking a job bagging groceries for WalMart!

The buyers are there, but not in numbers that they used to be, and they have LOTS of houses to choose from, and they don't want investment properties in a declining market.

There might be a little good news here: If you're thinking of gifting your house/s to your children (and hence avoiding estate taxes), you need an appraisal. That appraisal must have been done within six months of the gift. You could legitimately claim a lower value on your house and save some gift taxes or transfer taxes. You need an appraiser who understands what you're trying to do.

P.S. It seems Joe is back in the stockmarket.

You can get into this metziah for pennies, not millions. "Metziah" is Yiddish for a false bargain -- such a bargain! Something that looks cheap but isn't. The latest metziahs being peddled to investors by Wall Street are variations on the fund of funds themes, typically:

1. "To get directly into this exclusive fund, you need to invest $25 million. But we have an exclusive distribution deal with the fund manager. We can get you in for $250,000."

2. "This fund invests in five others. You get broad diversification (that's the theory), without the pain of having to reach the minimums on five funds and manage your investments in each one."

There is one problem with these metziahs. It's called "fees." They're typically outrageous. Call them fees on fees on fees. And more fees. First, the fund that does the bundling of all the little monies will have fees. There'll be a one-time sales commission and then on-going "management" fees. Then the underlying fund will have fees. Then the managers will have fees and expenses.

The whole deal is confusing -- some might say deliberately so. The fund's prospectus will typically report its recent rate of return as a "gross" number, e.g. 18% a year. That's not the number investors like you and I will get. We get "net." And it's always a lot lower. I have one such fund in front of me where a gross IRR of 8.3% a year (since 1997) was reduced to a net IRR of minus 0.3%. In another case, a gross IRR of 9.6% a year was reduced to 0.5% by the fees. At least you and I, small investors, earned something, even though it was far less than your local savings bank. I have another fund's prospectus that doesn't even show net IRR. In a tiny footnote, it says,

Gross multiple of capital and gross IRRs are presented on a “gross” basis before management fees, “carried interest,” taxes, transaction costs in connection with the disposition of unrealized investments and other expenses to be borne by investors in a fund, which will reduce returns significantly. ... Typical private equity fees at minimum would include an annual management fee of at least 1.5% of committed capital or invested capital and a carried interest of at least 20% of profits, as well as other fees and expenses. In addition, the net IRR would be further reduced by fees and expenses of the type that will be incurred by investors in the Partnership.

I don't know what all that means. My overly sensitive (and large) nose tells me that these funds are being created more for Wall Street's pleasure than for mine.

Adobe Photoshop Lightroom looks truly super: Digital photography's peril is the ease of shooting zillions of "free" photos. Managing them, not making them, then becomes the issue. From what I'm hearing and seeing, Adobe's new Photoshop Lightroom is THE answer to managing zillions of digital photos. It was designed for professional photographers. You can apply one set of changes to one photo and have the program automatically apply them to all the other photos. That one feature saves mega time. Lightroom goes on sale shortly for $199. Right now you can download a beta of it for free at present. Click here.

The Traders Expo is on this weekend in New York:
Friends who are going say it's great. It runs from Saturday through Tuesday lunchtime. Visiting the exhibit hall is free. For more, click here.

Anna Nicole Smith, dead at 39:

Did you have breast augmentation?” asked Larry King redundantly, bow tie a-quiver, when she appeared on his show. “Up or down?” “Both.” “Aren't there downsides to it?” he asked. Yes, Ms Smith said; they hurt her back. But, she might have added, it did no harm to flaunt them in gentleman's clubs in Houston in the half-dark, where ancient oil tycoons would try to grapple them. One such withered specimen, with a twinkle in his rheumy eye, made the attempt in October 1991; three years later, she married him. For the full obituary in today's Economist (of all places), click here.

I can't figure if these are sad, or deliberately funny:
Chicago Cubs outfielder Andre Dawson on being a role model: "I wan'all dem kids to do what I do, to look up to me. I wan' all the kids to copulate me."

New Orleans Saint RB George Rogers when asked about the upcoming season: "I want to rush for 1,000 or 1,500 yards, whichever comes first."

On hearing Joe Jacobi of the 'Skins say: "I'd run over my own mother to win the Super Bowl," Matt Millen of the Raiders replied: "To win, I'd run over Joe's Mom, too."

Torrin Polk, University of Houston receiver, on his coach, John Jenkins: "He treats us like men. He lets us wear earrings."

Football commentator and former player Joe Theismann: "Nobody in football should be called a genius. A genius is a guy like Norman Einstein."

Senior basketball player at the University of Pittsburgh : "I'm going to graduate on time, no matter how long it takes."

Boxing promoter Dan Duva on Mike Tyson hooking up again with promoter Don King: "Why would anyone expect him to come out smarter? He went to prison for three years, not Princeton."

Stu Grimson, Chicago Blackhawks left wing, explaining why he keeps a color photo of himself above his locker: "That's so when I forget how to spell my name, I can still find my clothes."

Lou Duva, veteran boxing trainer, on the Spartan training regime of heavyweight Andrew Golota: "He's a guy who gets up at six o'clock in the morning regardless of what time it is."

Chuck Nevitt, North Carolina State basketball player, explaining to Coach Jim Valvano why he appeared nervous at practice: "My sister's expecting a baby, and I don't know if I'm going to be an uncle or an aunt."

Shelby Metcalf, basketball coach at Texas A&M, recounting what he told a player who received four F's and one D: "Son, looks to me like you're spending too much time on one subject."

The weekend
Have a great weekend. Stay warm. Monday is a holiday. It's President's Day. See you Tuesday.


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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