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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 Friday, July 8, 2005: That was quick. Everyone got the message yesterday that terrorist acts make stock bargains. And instead of taking a month for the recovery (as in previous times -- see yesterday's column), it took two hours. And U.S. markets ended up yesterday. I guess it's our little way of saying to them (whoever they are) that we're not going to be terrorized.

This morning Cumberland Advisors emailed their clients:

London terrorism means more security apparatus will be formed on rail and other transport worldwide, more government cost will be incurred to provide it, more debt issued to finance it, more federal employees hired to administer it.

The economics of terrorism are costly. They are also inflationary and they put pressure on business profits. Financial markets knee jerk reaction to London were exactly in the opposite direction of the trends that London events will exacerbate. The reversal in hours suggests that the market trends in place are still valid.

Those trends are:

1. Rising interest rates in the United States. We see Fed policy raising the short rate; 3 1/2% Fed Funds will arrive in August. We expect the bond market will provide higher rates as well; we look for 4 1/2% to 5% at year end. We disagree with those forecasters (Bill Gross and others) who are planning for Fed rate cuts and a deflationary economic slowdown. We may get slowing but it will be inflationary not deflationary.

2. Energy (oil AND natural gas) are in a long term up trend in price. World demand is growing and that will continue for years. This morning's $61 is not the top for the oil price. Cumberland continues an energy over weighting in its stock portfolios.

3. Political bluster will not force the Chinese to revalue. They are now 1/7th of the world's output when measured in units of stuff produced and not in a common currency. They will decide their currency peg policy based on their political assessment and not on the advice of a U.S. politician. The dollar rally is fueled, in part, by IRS section 965 driven repatriation flows. That has a few more months to run.

4. Europe has to straighten out its political mess. Italy is a economic disaster waiting to happen. The old European socialists watch their model fail while the eastern European capitalists are growing. Germany appears ready for a political change that may lead to a growth policy. France will remain isolated until Chirac is gone. Then the country will either lurch to the far left and suffer more or go through it own shift to a more pro growth policy.

5. In the U.S. attention is intensifying on the list of Greenspan replacements. This process will continue until a successor is named. Markets want skill and monetary depth in their central banker. They don't want a repeat of the Miller Fed under President Carter. Someone like Treasury Secretary Snow would rattle markets if he were named the next Fed Chairman. Fed insiders are already known and would be quickly accepted. Bernanke falls in that category and would be greeted as having passed the Bush loyalty litmus test now that he is the President's economic adviser. Stay tuned for more theater as the clock ticks down on the Greenspan era.

At Cumberland, we continue to maintain a cash reserve target of 15% or higher in equity accounts. Our bias is toward higher cash, not lower. We believe that the stock market faces a rocky summer and that risk remains high. We think the market peaked last March when the Dow flirted with 11000. We expect this strategy will continue until the seasonally positive flow period this autumn.

We maintain our view that the interest rates in the bond market will trend higher. We believe that global real rates are too low. They eventually must adjust upward. Meanwhile these very low rates are providing fuel for a housing bubble which is a much larger asset bubble than the stock market was a half decade ago.

Check. Check. Check. It's now fashionable to nickel and dime customers. Every company that sends you a monthly bill -- your bank, your broker, your phone company -- is adding strange, creative charges to your bill. You must check every bill, line by boring line. My favorite "creative" charge is the $10 to $30 the banks charge for incoming wires. You'd think they'd want the money. Interest rates are edging up everywhere -- including what brokers lend you money at. No one, of course, tells you about higher interest rates or new charges. And often no one knows -- except the people in data processing who change the programming on your monthly bills.

It's too hard to make money in banking today: I sold my shares in Independence Community Bank (ICBC) yesterday. I worry about the spread between what banks are borrowing at and the horrendously competitive lending scene -- your friendly local broker now lends you money on your house. I worry about many banks who have been lending ridiculous amounts of money on houses in which the borrower has no equity and thus no incentive to keep paying -- if he loses his job or gets sick. I certainly wouldn't go near Bank of America (BAC).

Cell phones cost savings tips: My friend John Perri runs a firm called ComView -- the communications billing experts (click here). He tells me of horrendous mistakes in cell phone billing. I asked him for his top tips on getting your (personal and corporate) cell phone bills under control:

+ Monitor your minutes.
Minutes should be at 70% or more of your plan minutes. If usage is consistently below 70%, change your plan. If you continually go over the purchased minutes, upgrade to a plan with more minutes.
+ Look for non-listed plans. When deciding on a new plan or carrier, ask about plans that are not listed. Also ask about new plans, equipment purchase discounts and promotions due to be released in the next 30 days.
+ Look at your average minute cost: Divide the total cost of the plan (excluding taxes) by the minutes used to calculate the cost per minute. If the cost per minute is above 11 cents, search for a new plan or service.
+ When purchasing data plans, consider the type of usage. If your usage is mostly e-mail, (low bandwidth) a measured plan may be better.
+ Don't believe the salesman. When buying new phones/plans, don't take the salesperson's word. They are usually on commission and may forget to mention the more cost effective plans.
+ Check organizations you belong to including your employer. Some have affinity cellular discounts.
+ If you regularly call other countries, ask your carrier for discounts to those countries. You can get lower rates by paying a few dollars for an International plan.
+ Buy phone cards to use when your minutes exceed your plan. If you have a basic plan, use a cellular calling card to place long distance calls. Cards can be used for US and international calls.
+ Do not buy insurance unless you're a total idiot -- and have a tendency to break or lose your phone.
+ Get free options: Ask for as many free options as are available: mobile-to-mobile, nights and weekends, toll-free, caller ID, voicemail, etc.
+ Check you're not paying extra for detail billing when you could print the information you require via the Internet?
+ When buying new equipment, ask your carrier for a loyalty discount.
+ Carriers will negotiate termination fees.

+ Make sure all discounts are applied to all plans.
+ If pooling, make sure total usage is at 90% of total pooling minutes.
Optimize plans for users with lower usage.
+ Compare old plans against new. You may be able to gain minutes by updating plans.
+ Make sure you are not charged for services that carriers now offer for free such as mobile-to-mobile.
+ Carriers will negotiate almost anything these days. Nothing is off the table even if the rep says different.
+ Make sure individual users' annual expirations are coterminous with your master agreement.

The New York subways are busy, but scared: I rode them yesterday. You can feel the fear. Everyone knows it will happen here one day. The fear is heightened by a recurring loudspeaker message -- If you see something strange (like an unattended package), report it. Everyone has their own way of handling it. For me, my bicycle avoids the subway. I take comfort in that. I'm not moving, however. We, New Yorkers are a hardy lot.

Eat blueberries, but don't wash them. Blueberries top the list of antioxidant-rich fruits and vegetables, and are also a rich source of dietary fiber. Several studies have found the antioxidants in blueberries may help in preventing cancer, heart disease, stroke, and urinary tract infections. Do not wash blueberries until you are ready to use them – the added moisture will hasten the growth of mold.

Reminder: Don't forget to see The March of the Penguins, a gorgeous documentary narrated beautifully by Morgan Freeman.

The movie tells the story of the emperor penguin and the incredible sacrifices it makes to make babies. The story has love, drama, courage and adventure - all in the heart of Antarctica, the most isolated place on earth. For a preview of the movie, click here.

The greatest Darwin Awards:
These awards honor those least evolved.

1. When his 38-caliber revolver failed to fire at his intended victim during a holdup in Long Beach, California, would-be robber James Elliot did something that can only inspire wonder. He peered down the barrel and tried the trigger again. This time it worked.....

2. The chef at a hotel in Switzerland lost a finger in a meat cutting machine and, after a little hopping around, submitted a claim to his workers compensation insurance company. The company expecting negligence sent out one of its men to have a look for himself. He tried the machine and lost a finger. The chef's claim was approved.

3. A man who shoveled snow for an hour to clear a space for his car during a blizzard in Chicago returned with his Vehicle to find a woman had taken the space. He shot her.

4. After stopping for drinks at an illegal bar, a Zimbabwean bus driver found that the 20 mental patients he was supposed to be transporting from Harare to Bulawayo had escaped. Not wanting to admit his incompetence, the driver went to a nearby bus stop and offered everyone waiting there a free ride. He then delivered the passengers to the mental hospital, telling the staff that the patients were very excitable and prone to bizarre fantasies. The deception wasn't discovered for 3 days.

5. An American teenager was in the hospital recovering from serious head wounds received from an oncoming train. When asked how he received the injuries, the lad told police that he was simply trying to see how close he could get his head to a moving train before he was hit.

6. A man walked into a Louisiana Circle-K, put a $20 bill on the counter, and asked for change. When the clerk opened the cash drawer, the man pulled a gun and asked for all the cash in the register, which the clerk promptly provided. The man took the cash from the clerk and fled, leaving the $20 bill on the counter. The total amount of cash he got from the drawer...$15.

7. Seems an Arkansas guy wanted some beer pretty badly. He decided that he'd just throw a cinderblock through a liquor store window, grab some booze, and run. So he lifted the cinderblock and heaved it over his head at the window. The cinderblock bounced back and hit the would-be thief on the head, knocking him unconscious. The liquor store window was made of Plexiglas. The whole event was caught on videotape.

8. As a female shopper exited a New York convenience store, a man grabbed her purse and ran. The clerk called 911 immediately, and the woman was able to give them a detailed description of the snatcher. Within minutes, the police apprehended the snatcher. They put him in the car and drove back to the store. The thief was then taken out of the car and told to stand there for a positive ID. To which he replied, "Yes, officer, that's her. That's the lady I stole the purse from."

9. The Ann Arbor News crime column reported that a man walked into a Burger King in Ypsilanti, Michigan, at 5 a.m., flashed a gun, and demanded cash. The clerk turned him down because he said he couldn't open the cash register without a food order. When the man ordered onion rings, the clerk said they weren't available for breakfast. The man, frustrated, walked away.

10. When a man attempted to siphon gasoline from a motor home parked on a Seattle street, he got much more than he bargained for. Police arrived at the scene to find a very sick man curled up next to a motor home near spilled sewage. A police spokesman said that the man admitted to trying to steal gasoline and plugged his siphon hose into the motor home's sewage tank by mistake. The owner of the vehicle declined to press charges, saying that it was the best laugh he'd ever had.

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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