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Harry Newton's In Search of The Perfect Investment Technology Investor. Auction Rate Securities. Auction Rate Preferreds.

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8:30 AM EST Thursday, July 31, 2008: The end of a month all of us will want to forget.
Your portfolio probably lost money in July. Mine did. My hedgies (hedge fund managers) found, to their despair, that none of their strategies worked. I had this little email conversation with one hedgie who's down 5% for July:

Harry: Being a long-term investor is a good thing, but why don’t you short some obvious cockroach stocks and make a little short-term money?

Answer: What's obvious anymore?

Harry: Obvious list coming shortly.

Answer: Lehman up 9% today? MBIA up 15%? XLE up 5.5%?

T. Boone Pickens figures it's "obvious" to ride along Carl Icahn's shirt tails and buy Yahoo. He figures Yahoo management is savvy enough to take Microsoft's $32+ per share bid. But T. Boone just gave up and sold his 10 million Yahoo shares for $50 million to $70 million loss.

In an interview with the SF Chronicle, Pickens called Yahoo management “pathetic" -- which seems a perfectly appropriate word to describe how efficiently they just lost their shareholders a third of their value... and I'm betting a lot more in coming weeks. (Yes, an "obvious" short. Yahoo is now on its down way to $!5.)

Trying to find a bottom? File under "Everyone has a theory." The Vick/Cho Group out of Smith Barney's Santa Rosa, CA office recently wrote:

The market is trying to find a bottom. It continues to lurch back and forth giving investors a whiplash as it goes from zero to hero and back again. The media runs with every tick up or down. Yesterday (July 27) the 2% decline was triggered according to a Bloomberg report that the IMF (International Monetary Fund) said that there is "no end in sight" to the American real estate debacle. By the way, the IMF did not report the debacle arriving, but once pointed in the right direction, can anticipate the future. The IMF is an international organization of 185 member countries that promotes international monetary cooperation, exchange stability and orderly exchange arrangements.

A closer look at "boots on the ground" from an Executive Summary from a Florida realtor reported this month stated:

1. Sales in the Naples area rose 13% in the second quarter compared to the same quarter last year.
2. Unit sales in the $300,000 and under market were up a robust 56%.
3. Pending sales were up 53% versus June of 2007, well above last quarter's 13% increase.
4. Median home prices in Naples are now down 28% since the market peak, declining 5 points since last quarter.
5. On balance, the modest positive evidence in the prior two quarters suggesting a bottom was a forming in the Naples real estate market was buttressed this quarter by its best relative performance since the downturn began almost 3 year ago. ...

On unemployment the US Dept. of Labor said the US workforce will lose 46 million college-educated baby boomers over the next 20 years. They are not being replaced by the incoming workforce population. We are on the cusp of a shortage of workers. Roughly the math begins to rollover in 2010…within two years. So when the Wall Street Journal reports that unemployment is "soaring" (the word they used to describe the unemployment increase of 32,000 or .0002% of the 145,000,000 employed workers) perhaps some perspective might be in order. Do some people really only have the attention span of a remote TV click? ...

We believe persistent problems in the housing and credit markets and their potential impact on U.S. economic growth will continue to cause volatility in the equity markets over the near term. We note that many of the issues plaguing risky assets at present may take some time to work their way through the system. Near term, our analysis suggests that bottoms-up analyst EPS forecasts, which call for growth in excess of 4% for 2008 and nearly 20% in 2009, are still too optimistic and will be revised lower over time, particularly if Citi economists’ profit growth forecasts of 1.6% in 2008 and 5.3% in 2009 are to be met.

In our view, this process will be healthy but potentially disruptive for the market and could exacerbate an already-volatile equity market environment. Longer term, however, we believe the equity market is reasonably well positioned to contend with these concerns; we point to attractive valuations, solid corporate balance sheets (excluding financials), and strong free cash flow generation as drivers for equities going forward. Risks to a sustained market rally include a continued deterioration in credit markets, persistently high oil prices, and meaningfully slower global economic growth. Given our longer-term positive view, we would use periods of market weakness to upgrade portfolios and build positions in high-quality companies that generate strong free cash flow and possess above-average prospects for growth.

Their point? As intelligent human being, your attention span (and hence panic level) should be longer than a gnat. Sadly, mine often isn't.

Xobni hits today's Wall Street Journal: Xobni is a search engine for Outlook. I tried it and didn't like it. You won't, either, despite what Walt Mossberg says today. Lookeen is a much better Outlook add-in.

Explosion in new businesses: Judging by my phone calls, everybody and their uncle is starting a new business and wants me to give them my money. Lessons I've learned:

1. They have the checkbook. So they're in control.

2. Paper reports you get can be less than accurate. I met a money manager in Australia when I was there a couple of years ago. He showed me the impressive results his clients were getting. Turns out he made up the numbers. Now he's spending two and a half years in a fine Australian jail. He had a serious gambling problem. I didn't give him any money. I gave him some "tasklets." He failed to deliver. I smelled a rat and went elsewhere. I didn't realize he was a crook, however.

3. All the fancy paperwork protects no one, including you. See point 1. Character is what counts. See point 2.

4. Most people are honest, but not competent enough to make good money with your money.

5. You don't need to pass an IQ test to buy an Armani suit, rent a corner office, employ a lawyer or buy stocks.

Wunderground is better than This tip from my genius son, who hasn't had my bike stolen since he bought more chains than Houdini used.

Harry Houdini chained up. Michael has more chains on my bike. They're a lot thicker and heavier, too.

Never hide rows or columns in Excel. Group them. Grouping is an option you find under "data." You don't want to hide things in Excel because it confuses someone who might look at your spreadsheet. They won't see you've hidden stuff and their typing will screw up your pristine perfect work. With grouping, you select rows or columns, then do Alt DG. Grouped stuff shows a plus symbol in the margin. Hiding shows nothing. Hence, hiding is confusing. Grouping isn't. This tip from our favorite kickass Excel maven, Ms. Anne Himpens.

Remember my new desk? It contains my new Samsung 22 inch monitor, which I was touting. All my readers were impressed -- except for the bunch who berated me for the big glass CRT TV. Wrote one, "You should get a cheap LCD TV from Costco and use it as a spare monitor when there is nothing worth watching." Good idea. I tried that. The quality of ordinary (non-HD) TV on an flat-screen TV is terrible. Glass is better for non-HD. Flat screen is better with HD.

The Church Gossip
Mildred, the church gossip and self-appointed monitor of the church's morals, kept sticking her nose into other people's business.

Several members did not approve of her activities, but feared her enough to maintain their silence.

She made a mistake, however, when she accused George, a new church member, of being an alcoholic after she saw his old pickup parked in front of the town's only bar one afternoon.

She emphatically told George (and several others) that everyone who saw it parked there would know exactly what he was doing.

George, a man of few words, stared at her for a moment and then just turned and walked away.

He didn't explain, defend, or deny... He said nothing.

Later that evening, George quietly parked his pickup in front of Mildred's house... Walked home.. And left it there all night.

+ The journey of a thousand miles begins with a broken fan belt and a leaky tire,

+ If you think nobody cares if you're alive, try missing a couple of your mortgage payments.

+ If at first you don't succeed, skydiving is not for you.

+ Give a man a fish and he will eat for a day. Teach him how to fish, and he will sit in a boat and drink beer all day.

+ If you lend someone $20 and never see that person again, it was probably worth it.

+ Some days you're the bug; some days you're the windshield.

+ Everyone seems normal until you get to know them.

+ Never, under any circumstances, take a sleeping pill and a laxative on the same night.

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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