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9:00 AM EST, Friday, January 4, 2008: Caution. Caution. Caution. When I was a consultant, I said my primary role was to question assumptions. Think of a house. If it's built on a lousy foundation, whatever you put on top will fall down. You can make great investments, but if your basic assumptions stink, your investments will also.

I'm now in assumption-questioning mode. I have money in a short-term, one week bank CD. For the first time, I'm asking "What do you invest my money in?" I also put cash into short-term muni bond floaters. Now I'm looking more closely at their credit ratings. Are they higher because they're insured? I don't want insured bonds. I want bonds that achieved their high rating by their own virtue.

Don't take anything at face value any longer...

I suspect others are as cautious as I am. Which means it's really hard to get bank loans and get your company financed, etc. And the economy will keep slowing.

Eventually it will come back to "normal." It always does. I don't know when.

Meantime, cash and the sidelines have allure.

More discussion on efficient markets (AKA index funds): My oil guru Jim Kingsdale has posted a super piece on The Price of Oil. Meantime, he emails me:

Hi Harry - your piece yesterday on efficient market theory and the hucksters who huck that the same way every other approach is hyped makes me want to share one thought with you. The approach I take -- concentrating on sectors with strong secular growth virtually assured for many years -- which I call "the Tsunami Theory of Investing" -- has proven to work in my experience. And it is the only one I know of that works to supply well-above-average returns consistently over many years.

If you understood in the 1970's why cable television was bound to grow cash flows much more strongly and for much longer than nearly any analyst was willing to project, then you could have made a fortune just investing in cable stocks -- and many did. The same with cellular starting in the late 80's, early 90's. The same with manufactured housing in the 1960's. I lived through all that and invested, sad to say, only in the cellular Tsunami. Those Tsunami's have passed but the same principle applies now for oil and other natural resources, especially oil and gas.

The great thing about these Tsunamis is that you do not need to be a stock picker because virtually all the stocks work fine. That is especially true today with ETFs being available. Last year I was up over 38% with a portfolio primarily invested in oil and gas related companies. That's nice, but I almost feel stupid when I notice that anyone could just have bought the IYE, an energy ETF, and had virtually the same result that I did after a lot of work.

Will a Tsunami investment give you positive returns for every month of the Tsunami or even for every year? No. But it will be the best place to be invested as long as the analysts are behind the curve. As long as you hear a lot of people on TV saying the price of oil is too high, then you know you're fine investing in energy.

The scarcity of oil and gas and the transition to an all-electric economy is a Tsunami that has only begun to have it's impact felt and that impact will be greater than all the other three mentioned above combined. If you start to hear everyone else trumpet this theme, and particularly if they all begin to correctly understand the basic principles that underlie it, then the investment opportunity may have turned from a great investment opportunity into a bubble. But until that time, you can safely enjoy the ride. At least that has been my experience investing over the past 28 years. Jim.

If it works, don't mess with it. The corollary is that the newer isn't always better. In computers, that's often true. Microsoft's Vista is not better than Windows XP. Office 2007 is not better than Office 2003. Adobe Acrobat 8 is not better than Acrobat 5. Much new software is best politely called "bloatware." That means that the maker adds prettiness but not usefulness. The more prettiness, the bigger the software, the slower it runs. But sometimes the manufacturer does something egregious. Microsoft often releases something called service packs. In the old days, service packs were designed to fix problems in the original software. These days they seem to have a more sinister motive, namely to force you into the newer software by screwing up your old software.

Microsoft has released Service Pack 3 (SP3) for Office 2003. If you install this, you will find that your Office 2003 will no longer open and work with a staggering 24 older types of files -- including old Microsoft Word, Excel and PowerPoint. Apparently SP3 also forces you to use the newer file format inherent in Office 2007 -- which is a serious pain.

The lessons here are simple:

1. If it works, don't change it.
2. Keep original install files in a safe places.
3. Clone your hard disk several times.
4. Keep them in a safe place.
5. Don't react knee-jerk to Microsoft's nonsense about changing its software "to protect you." This is their new sales pitch. It's called desperation. When you can't introduce serious new innovation, you play the lawyer sales pitch: Sell fear. It makes me sad. For more on SP3, click here.

Stop news: My son just visited Microsoft Bangalore, India. He writes, "Not only are all their computers still running Windows XP pro but they openly made fun of vista and used it as an example of why top-down innovation doesn’t work."

This is a neti pot:

You fill it with warm water with some dissolved non-iodized salt. You tip the solution into one nostril and then the other. Zillions of people use it to solve sinus problems, like upper respiratory problems -- headaches, allergies, colds, etc. The neti pot has become a phenomenon since Oprah featured it on her TV show. You can read about it in yesterday's New York Times, see more on YouTube or YouTube, and buy one on Amazon for $12.

Bronchitis, 12 days later: Nothing is more boring than being sick, except being criticized by your family for constant coughing and spluttering. The sad news is I'm not alone. Everyone has it, which means I can no longer feel sympathy for myself. The bad news is that nothing really works, except time and chicken soup.

I figure two weeks minimum recovery. Bronchitis is viral, so antibiotics don't work. I went on a 5-day Azithromycin pack. It accomplished nothing, except gave my pharmacy $50 (bargained down from $70). Many readers recommended Mucinex, an expectorant, which seems to work. Other recommended Vick's Vapor Rub and Old Indian Wild Cherry Bark Syrup.

How children complete proverbs: I have no idea if this is true. Still, it's cute.

A 1st grade school teacher had twenty-six students in her class. She presented each child in her classroom the 1st half of a well-known proverb and asked them to come up with the remainder of the proverb.

Don't change horses
until they stop running.

Strike while the
bug is close.

It's always darkest before
Daylight Saving Time.

Never underestimate the power of
termites.

Don't bite the hand that
looks dirty.

No news is
impossible

You can't teach an old dog new
Math

If you lie down with dogs, you'll
stink in the morning.

Where there's smoke there's
pollution.

Happy the bride who
gets all the presents.

A penny saved is
not much.

Don't put off till tomorrow what
you put on to go to bed.

There are none so blind as
Stevie Wonder.

Children should be seen and not
spanked or grounded.

If at first you don't succeed
get new batteries.

When the blind lead the blind
get out of the way.

A bird in the hand
is going to poop on you.

And the WINNER is...

Better late than
Pregnant

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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