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8:30 AM EST Friday, February 22, 2008: "So Harry, what the heck is Mattress Cash?" Muriel, my wonderful assistant asked, "I understand we are supposed to go to mattress cash with our money. But my mattress is sewn shut and too expensive to cut open."

Mattress Cash is my term for an ultra-safe place to put your money. The term derives from where my grandfather put his savings. He had cause: He had run away from Germany's hyperinflation of the 1930s. The Nazis had confiscated all his assets. He rushed out of Europe carrying a few thousand dollars in U.S. greenbacks and a couple of diamonds. He arrived in Australia seven days before the outbreak of WWII. All his friends and relatives perished.

The search for ultra-safety has become an obsession -- not only for me, but also for millions of people all over the globe. It's a search motivated by two things: First, the collapsing credit markets, which seem to be progressively taking down one thing after another. Second, the collapsing economy, which seems to be taking down investor confidence and with it, the stockmarket.

I'm not into "gloom and doom." So don't dismiss this as "another of Harry's madnesses." But I am into protecting the capital that I spent nearly four and a half decades accumulating.

So here goes. The safest money is distributed money, i.e. not all in one place. Number one are FDIC-insured bank accounts. They're insured up to $100,000 per person. Here's what the FDIC says on its web site.

What does FDIC deposit insurance cover?
FDIC insurance covers all types of deposits received at an insured bank, including deposits in checking, NOW, and savings accounts, money market deposit accounts, and time deposits such as certificates of deposit (CDs).

FDIC deposit insurance covers the balance of each depositor's account, dollar-for-dollar, up to the insurance limit, including principal and any accrued interest through the date of the insured bank's closing.

The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities, or municipal securities, even if these investments were bought from an insured bank.

The FDIC does not insure U.S. Treasury bills, bonds, or notes. These are backed by the full faith and credit of the United States government.

How much insurance coverage does the FDIC provide?
The basic insurance amount is $100,000 per depositor, per insured bank.

The $100,000 amount applies to all depositors of an insured bank except for owners of certain retirement accounts, which are insured up to $250,000 per owner, per insured bank.

Deposits in separate branches of an insured bank are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.

Deposits maintained in different categories of legal ownership at the same bank can be separately insured. Therefore, it is possible to have deposits of more than $100,000 at one insured bank and still be fully insured.

Second safest investment are U.S. Treasury bills, bonds and notes. These are second safest because you could lose money on them. If interest rates rise, the value of these things will fall. Interest rates are fortunately not likely to rise.

Third safest investments are the government bonds of foreign countries. I like Australia. Their federal government bonds are paying as high as 6.89%, and apparently going higher. German bonds are paying 3.33%. U.K. bonds are paying 4.28%. Brazil government bonds are 11.15% to 12.53%, as you go out in maturity. There's a currency risk here. But it's more with the U.S. dollar than with these other currencies, which have been rising (and will continue to rise).

There are different tax implications. You'll pay more taxes overseas, but those taxes will be credited against your American taxes.

Fourth safest investment (and here we get into less safe ground) are the commodities -- especially gold, silver, platinum and oil. It's obvious that the huge run-up in these things has nothing to with global consumption (China, India, Brazil, etc.), it has to do with Mattress Money -- investors looking for a safe place to put their money, in view of the declining dollar, the declining U.S. economy, etc. It's "a flight to safety." It has all the markings of a bubble. Yet another bubble.

Fifth "safest" investment (certain irony here) is to profit by the credit contagion. Sell short, or buy puts. The financials are The Big Disaster. Big and little cockroaches appear daily. I have shorted Citibank. You can short individual local banks. Ask around, which ones were offering the easiest mortgages two years ago? Once banks start valuing their loans at what they're really worth, many banks will announce huge losses and drop their dividends. I can see another 10 point fall for Citigroup.

But the easiest way to profit by the financial credit crunch contagion is simply to sell short the entire financial sector by shorting the financial spider, XLF:

I'm running out of Mattress Money ideas. Suggestions welcome.

As I've written, I don't like the stockmarket. I told everyone to get out in mid-November and I was right. You've heard my feelings about the stockmarket. The following came in this week from a mature, very successful money manager, reporting on his recent results.

The last week of January was the best week the market has had since 2003, which was of course the first of a string of five good years. The market - and most of the usual cheerleaders - seems to expect a replay. I'm skeptical. Too many people seem to me too eager to call the bottom. This is not 2003. We are not on the verge of an explosion in innovative (and ultimately irresponsible) credit instruments which will generate superabundant liquidity and inflate the collateral value of investable assets and ultimately generate still more liquidity in a dizzying spiral of rising prices. that just happened - and it's over! The internet bubble was big, but brief. It was very different. Temporarily absurd valuations were not for the most part monetized. Many people made and lost paper fortunes so quickly they had no opportunity to borrow out or spend their windfall. Our recent real estate bubble was much bigger and much more pervasive and much of it was monetized. Ephemeral valuations were converted into real debt - debt which now creates serious and lingering problems for both debtors and creditors. This was not a typical expansion and I don't think we'll have a typical recession followed by a typical recovery. However, even if I'm right about this, it may be some time before the market begins to realize that its celebration was premature, so the next few months might be quite difficult for us. The other possibility is that I might be wrong about all this - which might even be more painful.

Update on failed Auction Rate Securities: "I don't have bad news. I just don't have any news." That was the gist of a thousand phone calls yesterday. In short, our money in ARSs is safe. We just can't get to it, i.e. sell it. Some brokerage firms will lend us money against our auction rate securities. But I don't know the terms or what percentage. I'm guessing 50% to 70% of their NAV (net asset value).

The good news is we're still earning interest on these things. All of us owners of failed auctions are earning more, some more than others.

The advice I keep hearing: Scream. The louder you scream, the more attention you'll get. I hear also that a letter to your state's Attorney-General and Governor might help. You might point out that your April 15 are stuck in these things. And if this problem isn't solved, the state isn't going to get your taxes for 2007. That should get their attention, since many states (e.g. California) are already seriously in the red, as tax collections have dropped off, while expenses continue to rise.

The typically stupid Texas joke.
A Texas gentleman asked a waiter to take a bottle of Merlot to an attractive woman.

The waiter took the Merlot to the woman and said, 'This is from the gentleman seated over there,' indicating the sender.

She regarded the wine coolly for a second, not looking at the man, and decided to send a reply note to the man. The waiter, who was lingering for a response, took the note from her and conveyed it to the gentleman.

The note read: "For me to accept this bottle, you need to have a Mercedes in your garage, a million dollars in the bank, and 7 inches in your pants."

After reading the note, the Texan decided to compose one of his own in return. He folded the note, handed it to the waiter and instructed him to return it to the woman.

It read: "For your information, I have a Ferrari Maranello, a BMW Z8, a Mercedes CL600, a Porsche Turbo and a Toyota Prius in my garage. I have homes in Aspen, Colorado and Miami and a 10,000 acre ranch in Texas .. There is over twenty million dollars in my bank account. But not even for a woman as beautiful as you, would I cut three inches off. Just send the bottle back."

The weekend:
It's snowing and cold this morning in New York. I thought Al Gore promised it would always be warm.

Snow in New York. Good exercise for the back. Time to put snow tires on the bicycle and go play tennis, indoors.

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.
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