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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, Wednesday, February 28, 2007: American stockmarkets plunged a whopping 4% yesterday. Nobody knows exactly what happened yesterday, or why. There are theories. The previous day's China plunge clearly triggered the beginning of the American plunge. Then programmed computers at institutions and hedge funds apparently "saw" what was happening, saw prices had fallen below pre-programmed levels and started selling. They do this to limit trading losses. As prices dropped even further, so more computers jumped in and sold even more shares. These computers now comprise more than half the daily trading on U.S. stock exchanges. Some people think the programmed trading computers are out of control -- with the exception of the traders who have them and who had some Russian mathematical genius program them.

The whole mess was aggravated by a "glitch" in the NYSE's computers that calculate the critical Dow Jones averages (there are many "Dow Jones" averages). The NYSE has been "in transition" ever since it moved from manual to computer trading. Trust a computer to screw things up. And it wasn't even running Vista.

Several things are clear:

1. There is no substantive reason for yesterday's drop. Profits remain solid. There remains some fear of a recession later in the year, though the likelihood seems to be fading, as the consumers continue to shop until they drop.

2. The markets had been "due" for a selloff. As I wrote yesterday, "There are people who believe we're due for a 10%+ slide in stocks -- a reaction to strong gains of the past three years." In short, nothing goes up in a straight line.

3. Previous large one-day selffoffs -- such as the 684 points drop on the first day the markets opened after September 11, 2001 or the 508 points on October 19, 1987 -- have been quickly recouped. And this one will, too. A huge number of people, with cash at hand, are sitting on the sidelines waiting for this drop to play itself out and pick up all the "bargains." You can get a glimpse of that from yesterday. Though the market closed down 475 points on the Dow, at one point it was actually down 546 points. People are already jumping in to pick up the bargains.

4. No one ever made money in the stockmarket by panicking. This is one of Cramer's favorite quotes. He's right.

Here's how the markets fared yesterday:

As to which bargain/s to buy? My suggestion is to watch the stocks you're already in (and feel comfortable with). Pick up a little more of those that have cratered the most. Last night, Cramer had a simple three-part scheme:

1. A stock which pays you a dividend that's equal or more than a treasury yield.
2. A stock that's part of an announced corporate buyback. His theory is they'll buy more back when the price is cheaper.
3. Companies whose earnings are meeting or beating their expectations. In other words, don't buy deadbeats. Dah!

His specific recommendation was the five major brokerage -- Goldman, Lehman, Merrill, Morgan Stanley and Bear Stearns. His argument? Great management and low price/earnings ratios -- all around 10. He liked Goldman the best. I agree with him. I like Goldman, too.

Big changes are hitting the wireless business -- for good. Today, you can't buy a cell phone from Harry's Cell Phone Manufacturer and "plug it into" Verizon's or Cingular's network. You have to buy an "approved" phone from Verizon or Cingular. They do this to lock you into their service. By doing so, they limit all the neat things that independent cell phone makers would like to introduce -- like Bluetooth file transfer, Wi-Fi calling, advanced SMS features, pay by cell phone, and even call timers.

Now there are pressures to open up -- just as the landline phone companies did in 1968 with the FCC's famous Carterfone decision. Skype has petitioned the FCC. to force the carriers to open up. There are too many advantages for the carriers to resist. For one, they won't have to sell phones at a huge loss. For another, they'll get more revenues from all the add-on services brought to them by independent phone equipment makers.

How Saudi Arabia managed to bungle all that oil wealth and achieve such miserable wealth for its people. Reader Peter Shaw answered: "Very simple. Unbridled greed. Ever see Prince Bandar's spread in Aspen?"

Now he's no longer ambassador the U.S., Bandar's house is up for sale at $135 million. It's probably the U.S.'s most expensive single family home. The 56,000-square-foot palace is bigger than the White House and includes 15 bedrooms, 16 to 26 bathrooms -- reports vary -- an indoor swimming pool, an elevator and dumbwaiters on a 95-acre estate with horse stables, a tennis court, trails, ponds and other water features all overlooking Aspen. This property is only one of several he owns in Aspen. For more,
click here.

What's happening here?

Mr. Feldman came home early and found his wife in bed with another man.

"What the hell are you doing?" shouted the irate husband.

"See," the wife said to the man lying beside her. "Didn't I tell you he was stupid?"

Running around with the young chippee!
Mrs. Grossman was having her portrait painted. "I want you should put a gold bracelet on each wrist, a pearl necklace around my neck, rub earrings on each ear, an emerald tiara on my and, on each finger, a 10-carat diamond ring."

The artist was bewildered. "Why do you want to ruin a beautiful painting of yourself with all that stuff?"

Mrs. Grossman explained, "My husband is running around with a young chippee. When I die, I want she should go crazy looking for the jewelry."

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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