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Newton's In Search Of The Perfect Investment. Technology Investor. Previous Columns
8:30 AM Wednesday, February 9, 2005: I have resisted making a forecast for 2005. I wasn't sure how things were shaping up. I am convinced that this will be a difficult year for all aspects of our economy, especially technology and real estate. I believe 2005 will be a down year for stockmarkets. There are several obvious reasons. The two great recent growth engines are flagging. First, the bloom is off government spending -- which boomed after 9/11/2001. Second, the US consumer is being hurt by rising interest rates, soaring energy prices and higher health care costs. Meanwhile the government's tax incentives of 2002-2004 have ended. Merger frenzy is cutting job after job. And jobs are being lost as management ships its factories en masse to China. Today's tech world, to quote Fred Hickey's latest newsletter, is "a tale of slumping sales, falling orders and backlogs, plunging prices, building inventories, excess [factory] capacities and job losses."

Last night I pondered what I'd learned on Friday and Saturday at the Arizona Real Estate Investors Association meeting. And I wrote for the upcoming issue of our magazine, Personal Real Estate Investor, "The signs are all around: exploding prices, hefty influx of out-of-state investors, rehabbing and foreclosure margins narrowing and a feeling not unlike the Tech Stock boom of the late 1990s." I warned, "The boom in Arizona real estate is peaking. ... There remain plenty of opportunities. But I want our readers to do their homework, do their due diligence, don't over-commit themselves and don't make unrealistic assumptions about prices continuing to float through the ceiling."

I am convinced that the bursting real estate bubble will not produce a Tech Wreck of 2000-2001 in which tech stocks routinely dropped 80% and 90% and never came back. We're looking at a flattening of Arizona price rises -- perhaps we'll see only a 5% rise this year and some drops elsewhere in less buoyant, desirable places. Don't forget that new home sales for the entire U.S. slumped 13.1% in November, came back 0.1% in December, but were still 2% below December 2003. January sales won't be out until the end of this month.

So where does this all leave our 2005 investing?
+ Cash remains king.
+ Later this year, stocks and real estate should be cheaper. It will be nice to have cash to take advantage of the opportunities.
+ Anything with income is better than stuff without. Dividend payers will be increasingly relished.
+ We should reduce our equity holdings -- especially large companies that will be hit by the consumer downturn, e.g. Wal-Mart.
+ We need to say NO even more selectively and do our due diligence more thoroughly. One key factor I learned in Arizona is that when things boom, sellers get sloppy with their facts and buyers don't check them enough -- figuring that the continuing boom will compensate for their mistakes (or laziness).

Hickey's recommendations are predictably bearish. Fred Hickey writes the High-Tech Strategist newsletter. What makes his bearish predictions more credible this time are his extensive research and his quoting company after company reporting downturns in sales. There's too much detail for this column. Suffice, Hickey owns put options on Best Buy, CDW, Dell, Hewlett-Packard, Lexmark, Amazon, eBay, Google, Applied Materials, KLA-Tencor, Texas Instruments, Research in Motion, Intel, Countrywide Financial, Capital One and IBM.

Today I will buy some put options on some (not all) of these stocks. (Certainly not HP, which will probably fly after today's news.) Many are of Hickey's shorts are egregiously
overpriced -- even if their sales and earnings were to hold up. Which they won't. Hickey, who's been at this much longer than I have, advises individual investors NOT to sell short, since the ups and downs of ownership can be gut wrenching. The market doesn't always agree with you. But the nice thing with options as against selling short is that the price of the option is all you can lose -- as against selling short where you can lose the farm.

Greenfield Online reports tonight: My brilliant son Michael's brilliant recommendation -- Greenfield Online (SRVY) reports its earnings tonight at 5 PM on a webcast. Click here. So far, Michael's brilliant recommendation has been a brilliant failure, with its price dropping faster than a speeding bullet. My son is hoping (praying) that this afternoon's conference call will be his salvation. Meantime, I am presenting Greenfield's latest price chart and entitling it, in his honor, GreenfieldSucks.gif.

How to connect to and from broadband while on the road: Imagine a hotel room with a cabled broadband connection at an uncomfortable desk or a horrid location. No sweat. Plug in your D-Link Pocket Router. Instantly your cabled broadband is converted to wireless. You can now lounge comfortably on your bed, catching up on emails and watching BubbleVision. I bought one of these things because -- and I admit it -- I'm fascinated by technology travel toys. It came yesterday. Last night I opened the box, plugged it in, ignored the instructions and bingo, it worked flawlessly. I'm now transmitting this column to the Internet over my D-Link Pocket Router.

There are three things I like about this $70 gadget: It works. It's tiny and light -- no chunky, clunky power adapter. Third, it comes in its own cute, fake-pigskin zip-up case. The case measures 5" x 6" x 1". You won't get a hernia from packing it with on your next trip. You could use this thing as a permanent wireless router in your home. But there are cheaper ways -- namely the Linksys devices at your local Radio Shack.

HP's Carly Fiorina has been fired. Hewlett-Packard Co.'s board announced that Carly Fiorina has stepped down as chairman and chief executive, effective immediately, over "strategic disagreements." Robert P. Wayman, HP's chief financial officer, has been named interim CEO and appointed to the board. Patricia C. Dunn, an HP director since 1998, has been named nonexecutive chairman, also effective immediately, the company said. "While I regret the board and I have differences about how to execute HP's strategy, I respect their decision," said Ms. Fiorina in HP's press release. The board will begin a search for a new CEO immediately.

Personally, I feel sadness at Carly's demise. How could she do this to me? I now must find someone else to kick around. But whom? Got any suggestions?

It's time for geriatric sex therapy
A Florida couple, both well into their 80s, went to a sex therapist's office. The doctor asks, "What can I do for you?"

The man says, "Will you watch us have sexual intercourse?" The doctor gasps and raises both eyebrows, but he is so amazed that such an elderly couple is asking him to observe them, for his sexual advice, that he agrees.

When the couple finishes, the doctor says, "There's absolutely nothing wrong with the way you have intercourse." He thanks them for coming, wishes them good luck, charges them $50 and he then says good bye.

The next week, however, the couple returns and asks the sex therapist to observe them again. The sex therapist is a bit puzzled, but
agrees, again amazed that they are on such a frequent sexual schedule at their age.

This happens again over the next few weeks. Each time the couple makes an appointment, asks him to observe, then has intercourse with no
problems, pays the doctor and leaves.

Finally, after five or six weeks of this routine, the doctor says, "I'm sorry, but I have to ask. Just what are you asking me to help you find out?"

The old man says, "We're not asking you to find out anything. She's married and we can't go to her house. I'm married and we can't go to my
house. The Holiday Inn charges $98. The Hilton charges $139. We do it here for $50, and we get $43 back from Medicare.

And for the absolute worst technology joke
Q: Why are there so many Smiths in the phone book?
A: They all have phones.

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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