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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 Thursday, February 7, 2008: The
worst part of all this is the helplessness. You're sitting with cash, bereft of ideas, frustrated with your inaction. You're aware there are huge opportunities. But... A friend bid on 250 houses in Arizona, individually one property at a time. Her idea is simple: Rent the houses -- there's a huge demand for rentals -- and sell them when their value comes back. Meantime, at the right purchase price, a rental can return 8% to 9%, more with a conservative bank loan. There is a huge demand for rentals. The erstwhile home owners got to live somewhere. Dah!

Not one bid was accepted. Most never got a response from the owners. "The institutions should be unloading," says my knowledgeable friend. "Their properties are skidding in value by the day. I've visited properties I've bid on. They're stacked with rotting household garbage, the appliances are missing, the sinks are gone, the doors are off their hinges, the light fixtures have been removed and airconditioners taken. The houses stand abandoned. With no maintenance, they deteriorate, dragging down the value of all the houses in the neighborhood. And the spiral of misery worsens."

She continues, "The institutions do not have the skills to manage the orderly sale of their disasters (also called houses). No one is in charge. You can't find anyone to negotiate with. These mortgages were sliced and diced, sold to every Tom, Dick and Harry. Imagine cutting up a chicken, then trying to put it back together. That's what we're facing now."

As to how this will affect the economy? My friend says "A tsunami is coming." Try this: Thousands of people were sold houses with 100% financing. No money down. Then many borrowed a second mortgage. Bingo free money! Mannah from Heaven. Everyone went on a spending spree. Hello, Best Buy, Sears, Wal-Mart That money is now gone." And the credit cards need to be paid, or bankruptcies declared.

How much more will housing prices fall? Item: In Phoenix an appraisal on a property by professional appraiser used to be good for six months. Now it's good for only 10 days. I don't make this stuff up.

Florida has no income taxes. That's good. But it taxes real estate heavily. That's bad. Try this: Your annual real estate taxes are 2% of what you paid. Simple calculation. Good if housing prices are skyrocketing. But not if they're plummeting, as now. The 2% tax becomes a real bar to buying property. Florida is encouraging its empty houses to stay empty and abandoned. A rotting asset. Then there's hurricane insurance. You don't want to go there.

The good news for the rest of us is we can have a wonderful vacation in Florida renting a palace for one-tenth of what it would cost us to stay at the local Four Seasons Hotel. I don't make this up. A friend just rented a three bedroom condo which was actually part of a hotel complex and enjoyed all the hotel privileges at one-tenth what it cost to stay in the hotel.

Helplessness. Money burns a hole in your pocket. No one can stand the frustration of sitting idly, not putting one's money to work -- to use a tired Wall Street expression, watching it sit there and "earn" 3.25%.. "Stocks are cheap" says my friend. The key is to buy the "best companies at the cheapest price." True. But the "best" companies are not doing well -- viz. recent reports from Cisco, Wal-Mart and others. And the likelihood is that as fear spreads more widely, pocketbooks will close even tighter.

My friends fear for the banks from which they have miserable-paying CDs. They fear for the municipal bonds they thought were their retirement. They fear for their job. They fear that one day soon they will watch stock prices slide 20%. They fear for an administration that is clueless, one that believes low interest rates and tax cuts are the universal panacea.

The fear is palpable, but the opportunities immense. If only those institutions could get their act together.

Free money for going on an interview: I kid you not. It's a startup's new idea. Try NotchUp.

Good time to go shopping: Items on sale -- like washing machines, TVs, fridges -- can be bargained down even further with approaches like . "Can't you do a little better?", "I hear this is your last one" and "This one is scratched." Friends are using such techniques on retailers desperate to move inventory.

Australian culture -- 1
From the state where drunk driving is considered a sport, comes a true story from the Sunshine Coast , Queensland . Recently a routine police patrol parked outside a local neighborhood tavern. Late in the evening the Officer noticed a man leaving the bar so intoxicated that he could barely walk.

The man stumbled around the car park for a few minutes, with the officer quietly observing. After what seemed an eternity and trying his keys on five vehicles, the man managed to find his car, which he fell into. He was there for a few minutes as a number of other patrons left the bar and drove off. Finally he started the car, switched the wipers on and off (it was a fine dry night), flicked the indicators on, then off, tooted the horn and then switched on the lights. He moved the vehicle forward a few cm, reversed a little and then remained stationary for a few more minutes as some more vehicles left.

At last he pulled out of the car park and started to drive slowly down the road. The police officer, having patiently waited all this time, now started up the patrol car,

put on the flashing lights, promptly pulled the man over and carried out a breathalyzer test.

To his amazement the breathalyzer indicated no evidence of the man's intoxication.

The police officer said 'I'll have to ask you to accompany me to the Police station - this breathalyzer equipment must be broken.'

'I doubt it,' said the man, 'tonight I'm the designated decoy.'

Australian culture -- 2
Bob walks into his bedroom with a sheep under his arm and says: "Darling, this is the pig I have sex with when you have a headache."

His wife is lying in bed and replies: "I think you'll find that's a sheep, you idiot."

The man replies: "I think you'll find I wasn't talking to you."

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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