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Harry Newton's In Search of The Perfect Investment Technology Investor. Harry Newton

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9:00 AM EST, Thursday, January 29, 2009: Everyone and their uncle have tightened their spending. This is bad for the economy since 70% of our GDP is consumer spending. My Australian friend, Rob Douglass, suggests that the economic stimulus program include a year's supply of Valium for everyone over 18 with more than $100 of spendable money in their bank account.

Rob describes the present feeling in Australia. "The water has disappeared from the beach. We know a tsunami is coming. We just don't know how big it will be, or when it will arrive."

He suggests that the program also include a Frequent Spender Program. Reward should be a month's supply of Viagra. Anything to get the consumer's mind off his fears.

Douglass' black humor is a sad commentary on the actual $819 billion "stimulus" program which seems to me to be less about actually stimulating and more about extending health care and unemployment benefits. But, like all Washington financial legislation, there's weird stuff -- like exempting yacht-repair companies from paying for federal workers' compensation insurance.

The overarching problem of the "stimulus" program is that (1) it's the creation of politicians, (2) it follows the philosophy that says if you throw enough money at a problem it will solve the problem and (3) it creates gigantic pressures on the U.S. finances -- the dollar and its debts. It doesn't solve the housing problem which got us into this mess.

Sadly, I don't see an "Ah Hah!" investment idea. Buy healthcare? Buy a supercomputer company. The Senate version of the stimulus bill includes $70 million for a supercomputer at the National Oceanic and Atmospheric Administration. Just what the world needs now.

In Davos, Professor Nouriel Roubini reiterated his prediction that U.S. financial losses will more than triple to $3.6 trillion and said that most banks in the U.S. are insolvent and should be nationalized. The IMF predicted the global economy will halt this year, brought down by more than $2 trillion of bad assets in the U.S.

What "sophisticated" investors are doing: They are doing two things:

1. Shorting the market in general and stocks in particular.

2. Playing around with ETFs -- especially the single, double and triple ultrashort financial funds -- e.g. SKF, UFG, FAZ, FAS, SRS, SRF. I know how bad it is when brokers call me to tell their latest, best idea is the SKF. I can make 70% on my money in ten days. And other fantasy. My nose tells me to shy well away. When Wall Street creates a product to peddle to you and I, the product ultimately blows up. I instance auction rate preferred. I don't know how these ETFs are going to blow up. But blow up they will. Stay away. These things also go up and down faster than a whore's drawers (Australian expression). They represent a surefire way to make a small fortune -- so long as you start with a large one. (Bad humor).

Fees and bonuses. It's all Wall Street cares about. From today's New York Times. Read and be sick.

What Red Ink? Wall Street Paid Hefty Bonuses

By almost any measure, 2008 was a complete disaster for Wall Street — except, that is, when the bonuses arrived.

Despite crippling losses, multibillion-dollar bailouts and the passing of some of the most prominent names in the business, employees at financial companies in New York, the now-diminished world capital of capital, collected an estimated $18.4 billion in bonuses for the year.

That was the sixth-largest haul on record, according to a report released Wednesday by the New York State comptroller.

While the payouts paled next to the riches of recent years, Wall Street workers still took home about as much as they did in 2004, when the Dow Jones industrial average was flying above 10,000, on its way to a record high.

Some bankers took home millions last year even as their employers lost billions.

The comptroller’s estimate, a closely watched guidepost of the annual December-January bonus season, is based largely on personal income tax collections. It excludes stock option awards that could push the figures even higher.

The state comptroller, Thomas P. DiNapoli, said it was unclear if banks had used taxpayer money for the bonuses, a possibility that strikes corporate governance experts, and indeed many ordinary Americans, as outrageous. He urged the Obama administration to examine the issue closely.

“The issue of transparency is a significant one, and there needs to be an accounting about whether there was any taxpayer money used to pay bonuses or to pay for corporate jets or dividends or anything else,” Mr. DiNapoli said in an interview.

Granted, New York’s bankers and brokers are far poorer than they were in 2006, when record deals, and the record profits they generated, ushered in an era of Wall Street hyperwealth. All told, bonuses fell 44 percent last year, from $32.9 billion in 2007, the largest decline in dollar terms on record.

But the size of that downturn partly reflected the lofty heights to which bonuses had soared during the bull market. At many banks, those payouts were based on profits that turned out to be ephemeral. Throughout the financial industry, years of earnings have vanished in the flames of the credit crisis.

According to Mr. DiNapoli, the brokerage units of New York financial companies lost more than $35 billion in 2008, triple their losses in 2007. The pain is unlikely to end there, and Wall Street is betting that the Obama administration will move swiftly to buy some of banks’ troubled assets to encourage reluctant banks to make loans.

Many corporate governance experts, investors and lawmakers question why financial companies that have accepted taxpayer money paid any bonuses at all. Financial industry executives argue that they need to pay their best workers well in order to keep them, but with many banks cutting jobs, job options are dwindling, even for stars.

Lucian A. Bebchuk, a professor at Harvard Law School and expert on executive compensation, called the 2008 bonus figure “disconcerting.” Bonuses, he said, are meant to reward good performance and retain employees. But Wall Street disbursed billions despite staggering losses and a shrinking job market.

“This was neither the sixth-best year in terms of aggregate profits, nor was it the sixth-most-difficult year in terms of retaining employees,” Professor Bebchuk said.

Echoing Mr. DiNapoli, Professor Bebchuk said he was concerned that banks might be using taxpayer money to subsidize bonuses or dividends to stockholders. “What the government has been trying to do is shore up capital, and any diversion of capital out of banks, whether in the form of dividends or large payments to employees, really undermines what we are trying to do,” he said.

Jesse M. Brill, a lawyer and expert on executive compensation, said government bailout programs like the Troubled Asset Relief Program, or TARP, should be made more transparent.

“We are all flying in the dark,” Mr. Brill said. “Companies can simply say they are trying to do their best to comply with compensation limits without providing any of the details that the public is entitled to.”

Bonuses paid by one troubled Wall Street firm, Merrill Lynch, have come under particular scrutiny during the last week.

Andrew M. Cuomo, the New York attorney general, has issued subpoenas to John A. Thain, Merrill’s former chief executive, and to an executive at Bank of America, which recently acquired Merrill, asking for information about Merrill’s decision to pay $4 billion to $5 billion in bonuses despite new, gaping losses that forced Bank of America to seek a second financial lifeline from Washington.

A Treasury Department official said that in the coming weeks, the department would take action to further ensure taxpayer money is not used to pay bonuses.

Even though Wall Street spent billions on bonuses, New York firms squeezed rank-and-file executives harder than many companies in other fields. Outside the financial industry, many corporate executives received fatter bonuses in 2008, even as the economy lost 2.6 million jobs. According to data from Equilar, a compensation research firm, the average performance-based bonuses for top executives, other than the chief executive, at 132 companies with revenues of more than $1 billion increased by 14 percent, to $265,594, in the 2008 fiscal year.

For New York State and New York City, however, the leaner times on Wall Street will hurt, Mr. DiNapoli said.

Mr. DiNapoli said the average Wall Street bonus declined 36.7 percent, to $112,000. That is smaller than the overall 44 percent decline because the money was spread among a smaller pool following thousands of job losses.

The comptroller said the reduction in bonuses would cost New York State nearly $1 billion in income tax revenue and cost New York City $275 million.

On Wall Street, where money is the ultimate measure, some employees apparently feel slighted by their diminished bonuses. A poll of 900 financial industry employees released on Wednesday by, a job search Web site, found that while nearly eight out of 10 got bonuses, 46 percent thought they deserved more.

What is motivation? Serena Williams is losing 7-5, 5-4.

Serena comes back to win the match. What motivated her? In her own words,

"I was thinking, 'Okay, if you lose, you're going to fly coach all the way back to Florida', how uncomfortable that would be. That motivated me to do a little better, I wouldn't necessarily want to go back on a 16-hour flight. I wouldn't allow myself to have the emergency row either. I would be so mad, I would have to sit in the last row, the tightest row. That way, I wouldn't do it again."

The Australian Open Tennis continues. Watch the Roddick/Federer match. It's on today. I won't tell you who won.
Terrible golf joke.
A husband and wife are on the 9th green when suddenly she collapses from a heart attack.

"Help me dear," she groans to her husband.

He quickly calls 999 on his mobile, and, after a brief conversation, picks up his putter and lines up his stroke. His wife picks her head up off the green and stares at him.

"I'm dying over here and you're putting?"

"Don't worry dear," says the husband calmly. "They found a doctor on the second hole and he's coming to help you."

"Well, how long will he take to get here?" she asks him feebly.

"No time at all," says her husband. "Everybody has agreed to let him play through."

Understanding Engineers
Two engineering students were walking across a university campus when one said, 'Where did you get such a great bike?'.

The second engineer replied, 'Well, I was walking along yesterday, minding my own business, when a beautiful woman rode up on this bike, threw it to the ground, took off all her clothes and said, 'Take what you want.'

The first engineer nodded approvingly and said, 'Good choice; the clothes probably wouldn't have fit you anyway.'

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.