Technology Investor 

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 Tuesday, January 29, 2008: Several readers have recently started their own businesses. They tell me it's easier to start a new business today than any time in the past five years. Reasons:

1. Cheaper labor. Lots of excellent people have lost their jobs and are now available.

2. Landlords willing to bargain on space.

3. Marketing is easy. Google ads are the best. Targeted and far less expensive than print.

4. More companies than ever are willing to outsource to remote workers.

5. All the corporate infrastructure you need is much less expensive -- what with cheap PCs, the Internet, cheap cell phones, an easy-to setup web site, etc. One reader reported "we purchased $20,000 worth of used cubicle furniture on eBay for $850."

6. You don't need to visit clients. Phoning and emailing work. A great web site is major plus.

7. Open-source software is available for next-to-nothing. One help desk application, easily worth $10,000, is available for a free download, legally.

Brilliant idea. Lousy execution. Buy gold ETF IAU was yesterday's column idea. Somebody was listening. I chased it all day with limit orders as it rose. I should have simply bought it on the open. Drat. It rose $1.62, or 1.79%. I'll try again today.

Will gold rise further? My thesis is yes. It's the ultimate "safe haven." Here's a recent piece from the New York Times, which says maybe I'm wrong.

Gold's Rise: It's Not Just Armageddon

THE price of gold has always been a way to keep score of economic, financial and political instability, but the game may be changing. The dollar is weak, inflation is troublesome and the world isn't getting any safer, but it is hard to see how those factors alone drove gold from just over $250 an ounce in 2001 to more than $900.

The decline in the dollar over the same time works out to less than 5 percent a year. The reported level of inflation is a fairly ordinary 3 percent or so, and government calculations do not take account of falling home prices and technological innovations that give consumers more bytes for the buck. As for politics, terrorism remains a threat, but it seems no greater or smaller than it has been most of the decade.

What has changed, many say, is that gold no longer benefits just from threats to prosperity but from prosperity itself.

"Gold is the ultimate commodity, and it carries the added cachet as a safe haven," said Robert D. Arnott, chairman of Research Affiliates, an asset-management firm. "Demand for gold plays a role in a strong economy, in a turbulent economy and also when there's inflation."

The supply-demand balance could send gold to $1,000 an ounce before long, said Vahid Fathi, an analyst for Morningstar. New supplies of ore are hard to find, he noted, and central banks have scaled back bullion sales. As for demand, it is strong from "the new class of prosperous consumers out there in China and India that traditionally have an affection for gold," he said.

Gold has helped make a lot of investors prosperous lately, but betting on continued strong gains almost requires economic conditions to be ordered a la carte.

Global growth must remain strong, even as it becomes palpably weaker in the United States and Europe, where most of the world's money is. And because much of the rise in gold must still come from its role as an inflation hedge, the slowdown in the West must somehow be accompanied by rising consumer prices.

Look at it this way: If gold is such a "heads I win tails you lose" proposition, then why did it perform so poorly for so long? Gold bulls have hailed the run to record highs as a breakout, heralding further advances - but it took 28 years to arrive. Neither Mr. Fathi nor Mr. Arnott could be considered gold bugs, that peculiar species of financial fauna with an unstinting belief gold prices rise perpetually.

Mr. Fathi's $1,000 target is not much more than 10 percent above recent levels, and his regard for mining shares is lukewarm at best. The dearth of fresh gold supplies raises prices, but it limits profit growth, he said, as do rising costs of commodities like aluminum used in processing ore.

Those conditions drive him to look for companies that are holding the line on costs while developing reserves. Mr. Fathi is modestly bullish on Harmony Gold Mining and Yamana Gold and neutral on Newmont Mining and AngloGold Ashanti. He suggested that investors interested in mining stocks diversify by buying exchange-traded funds that specialize in the sector.

INVESTMENT bank analysts appear more optimistic. Tony Lesiak at UBS has buy ratings on Newmont, Barrick Gold, Goldcorp, Agnico-Eagle Mines and Yamana.

John Bridges at JPMorgan Chase assigns overweight ratings to Agnico-Eagle, Coeur d'Alene Mines, Goldcorp and Kinross Gold. He is neutral on Barrick and Newmont, the giants of North American gold mining.

Peter Ward at Lehman Brothers is positive on the sector generally, but he advises underweighting Newmont and Barrick.

Mr. Arnott seems to like gold much less than his peers. He finds it "attractive as a diversifier because it's not correlated with mainstream stocks and bonds," but he owns none and says that "it doesn't make sense as a core holding ever" because almost every other investment returns more in the long run.

As for gold mining shares, he reasons that they should outperform the commodity over long periods - but not if gold's price is driven through the roof by the sort of unthinkable event gold bugs like to think about. "I don't think planning on Armageddon is sensible, and if we have Armageddon, who are you going to sell your gold stocks to?" seems to have some benefits: Start-up, was a hit of the recent computer show, Demo. Mint connects nightly to your credit card providers, banks, and/or credit unions and account balances automatically up-to-date. Mint even auto-balances your checkbook and auto-categorizes your transactions. I haven't used it yet. From Mint's site:

+ See where your money goes.
Restaurants? Shopping? Gas? Only Mint can give you the big picture in minutes today.

+Stop overpaying. Start oversaving.
We find you lower prices on the services you buy every month. And higher interest rates for the money you save— automatically.

+Get 24/7 Control.
Get alerts about bank fees, upcoming bills, low balances, and unusual spending.

Oh, for a nice Australian vacation!
Family on holiday in Australia when husband, wife and their 15 year old son go scuba diving. Son wanted a picture of his mum and dad in all their gear so he got the underwater camera. Dad realized as son took the photo, he looked like he was panicking. The son took the picture and swam to the surface and jumped into the boat. Mum and dad followed to see if he was OK. When the parents asked why he said 'there was a shark behind you.' The dad thought he was joking. When they got back to the hotel, they loaded the picture onto their laptop. This is what they saw. Notice how the shark is smiling. A true Kodak moment.

French trader was forced to work 30 hours a week
Jerome Kerviel last night blamed his $7 billion losses on unbearable levels of stress brought on by a punishing 30 hour week.

Kerviel was known to start work as early as nine in the morning and still be at his desk at five or even five-thirty, often with just an hour and a half for lunch.

One colleague said: "He was, how you say, une workaholique. I have a family and a mistress so I leave the office at around 2pm at the latest, unless I'm on strike, when I leave earlier. But Jerome was tied to that desk. One day I came back to the office at 3pm because I had forgotten my hat, and there he was, fast asleep on the photocopier.

"At first I assumed he had been having sex with it, but then I remembered he'd been working for almost six hours."

Last night a spokesman for Sócíété Générálé denied that Kerviel was overworked, insisting he lost the money after betting that the French were about to stop being rude, lazy and arrogant."

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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