The NASD released comment letters yesterday that added to a growing debate over the lucrative but controversial business on Wall Street of rendering fairness opinions in mergers and acquisitions. The self-regulatory organization for brokerage firms has proposed limited rule changes to require more disclosure of "significant" conflicts of interest by investment banks and what firms are doing to counteract those conflicts. ...

Some investor activists say the NASD proposal doesn't go far enough. Echoing Calpers, the investment office of the AFL-CIO, or American Federation of Labor and Congress of Industrial Organizations, called changes in the system long overdue and said the process had become tainted by "egregious conflicts." Calpers oversees $180 billion in pension-plan assets and unions affiliated with the AFL-CIO sponsor pension plans with more than $400 billion in assets.

The two investor groups took aim at the dual role that big Wall Street firms routinely play as both the adviser to companies involved in mergers and acquisitions and as provider of an opinion blessing the deal as "fair" to shareholders. Bankers wearing both hats often make the lion's share of their fees only if a deal gets done. "There is a very large incentive for an investment bank to find that a transaction is fair, regardless of the circumstances, when the bank will receive the bulk of its fee only if the transaction is successful," Calpers Chief Investment Officer Mark Anson wrote.

Such fees, which can reach tens of millions of dollars, are known as "success fees." Fairness opinion fees can range from tens of thousands dollars to several million. Critics say fee-hungry bankers rubber-stamp the deals their clients want, sometimes acquiescing to ill-conceived transactions that ultimately erode shareholder value or force thousands of unnecessary layoffs but that may enrich top executives of the companies involved. Fairness opinions have become the standard tool used by corporate boards to protect themselves against lawsuits and investor criticism of a deal's terms. ..."

Yet another merger gone south: In case you think I'm crazy generalizing about deals going south, the New York Times has a piece today about my least favorite Wall Street firm, Morgan Stanley:

"Last month, hundreds of top current and retired Morgan Stanley executives gathered at a memorial service for Richard B. Fisher, the former chairman, who masterminded the 1997 merger of his old firm and Dean Witter. In the front row at Riverside Church sat Philip J. Purcell, the current chief executive and Mr. Fisher's partner in designing a deal that was seen then as a template for the diversified global investment bank. Yet later at the reception, even amid the fond remembrances for Mr. Fisher, who died in December, there ran a vein of discontent about the company's direction.

Bankers complained how the underperforming businesses from Mr. Purcell's old Dean Witter, like the brokerage and credit card units, were creating a drag on the steamrolling profits being generated by the banking and trading divisions that Mr. Fisher had made the envy of Wall Street. A result has been a flagging stock price that has badly trailed that of Morgan Stanley's peers. Of course, grumbling among ambitious Wall Street executives is not unusual, especially after a merger. But in this case, the merger occurred eight years ago, time enough for warring factions to unify.

What makes Morgan Stanley's case different is that the divisions between the white-shoe Morgan Stanley bankers and the more Main Street Dean Witter bankers have become wider in recent years, highlighting a widening culture gap as well as a disparity in profits as Morgan Stanley's core banking business has thrived while the Dean Witter units have not.

At the same time, American Express and Citigroup - companies that once defined the concept of the financial supermarket that has long been dear to Mr. Purcell's heart - have spun off and sold their lagging business units in an attempt to get the market to attach a higher valuation to their faster-growing core operations. Now, the disclosure that Mr. Purcell was awarded $22 million in total compensation last year highlights questions about his strategy and performance.

"There is an issue of real franchise decay," said Scott Sipprelle, a hedge fund investor and former Morgan Stanley employee, who wrote a letter to the Morgan Stanley board this month proposing that the firm sell or spin off its lagging units. "I think there is a lot of disenchantment with the strategic direction of the firm."

Yesterday, he criticized Mr. Purcell's compensation. "Morgan Stanley's stock declined 4 percent in value last year and yet the C.E.O.'s pay was increased by 57 percent," he said in a statement. "In the context of this decision, this board has abjectly failed to implement a compensation policy that is performance-based, shareholder-aligned or fair."

Real estate syndication deals tighten: I'm looking at syndication offering annual returns between7.3% and 10.2% over the next ten years. The kicker will come when the building is sold. Let's say 10 years out. Making conservative assumptions, that still means an IRR of just under 10% for the life. Yields are tightening as prices continue up, and great deals are harder to find.

IRAs and real estate and you. There are reasons to have real estate in your IRA -- it's often a far better investment than the stock market. There are reasons not to -- namely it's complex. You can't personally use the place. But you can swap use of it with your brother or
father-in-law, or other people.

Latest airline tips:
+ Even with the new "easier" rules, book well in advance. Last night we tried booking a round-trip from New York to Columbus for this weekend. Cost $855. Book it for a few weekends later and you'll pay only $252.
+ The best JetBlue seats are in rows 1, 11 and 12. The second best are in rows 13-26. They have two inches more than the worst seats on the flight, rows 2-10.
+ Nonrefundable tickets aren't refundable -- unless you get sick and are at death's door. And then it's problematic. Today's Wall Street Journal says airlines work with customers on a case by case. Which means perseverance usually works. The squeaky wheel gets the most attention.
+ Airline gate agents have the power to change your ticket and get you on the plane -- with or with levying a hefty fine. A little begging will often save the $100.
For previous airline tips, click here.

Just what my son's dog needs: Every morning at 8:00, my son drops his 85lb white Lab off. And every day we babysit the dog -- walk it, peeh it, pooh it, exercise it and wash it when it rolls around in the mud once too often. It's a retriever, which means it will retrieve tennis balls endlessly. Throwing them ruins shoulders. So we have endless gadgetry -- from tennis racquets to "chuckits." My latest gadget might turn out to be a $150 gadget called the GoDogGo. This machine can hurl balls from 15 feet to 30 feet. You even get a TV-type remote control. Sit on the patio and exhaust your poor pooch while you sip martinis. Just what the doctor ordered -- for you and it. If you really want one, Click here. That's Winnie on the right. All 85 lbs of her. Cute, until you have to take care off her and curb her eat-anything (including the cat's do-do) instincts. Why are dogs sooooo stupid?

Winnie, 85lbs and not overly bright, but a great, enthusiastic licker.

The ultimate bad diet?
A doctor was addressing a large audience in Tampa. "The material we put into our stomachs is enough to have killed most of us sitting here, years ago. Red meat is awful.
Soft drinks corrode your stomach lining. Chinese food is loaded with MSG.
High fat diets can be disastrous and none of us realizes the long-term harm caused by the germs in our drinking water.
But there is one thing that is the most dangerous of all, and most people have, or will, eat it.
Would anyone care to guess what food causes the most grief and suffering for years after eating it?"
After several seconds of quiet, a small 75-year-old man in the front row, raised his hand and said, "Wedding Cake?"

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. That money will help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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