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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 EST, Wednesday, June 13: San Diego, California: Treasury yields are rising. Treasury prices are falling. Stocks are falling because of rising interest rates. At least that's what the "media" (the financial press) is reporting. Fact is they haven't a clue. Prices of bonds fall because more people are selling them than buying them. Isn't that what they taught in Econ. 101? So who owns so many treasurys that them selling could affect prices? Think China. Why China? In recent weeks, China's stockmarket has tumbled. Should this bother the authorities there? Yes. We know the Government is obsessed with power, control, stability, economic growth -- all those obvious things. China needs cash dollars (not invested bonds) to keep its millions employed. It needs the cash to buy Intel chips and Microsoft Vista to assemble into laptops and sell back to us.

Is my explanation plausible? As good as anyone else's. What will it mean for the next few months? I'm guessing very little. Soon China's crisis of control will pass. It will stop selling treasurys, yields will fall and stock prices will rise, once again. I'm not worried.

The Sandbox Trap: San Diego seems to have more inventors, angels, venture capitalists and entrepreneurs per square inch than any other place. It's an amazing feeling. It's new ideas and growth everywhere. I was on a 20-lane highway yesterday. That was ten lanes going one way and ten going the other way. Picking the idea to finance is not easy. Will the invention eventually work and sell? Or is your money destined for their sandbox?

Many inventors look for outside financing from angels or venture capitalists. Some people look for the money to grow their company, by selling product or service and ultimately making a profit. Some people look for the money so they can continue having fun writing software, creating hardware, and doing whatever cool neat new things amuse them. These are "sandbox" companies. They will never produce a real product for their customers or a profit for their stockholders. To be a successful investor, you need to identify sandbox companies and avoid them like the plague. I get a lot of proposals from inventors seeking money. In response to one, I wrote, "The problem I have - and I can smell this one - is that this is a sandbox company. A bunch of incredibly bright boys are looking for money so they can keep creating cool new technologies. My job, as investor, is to provide the money, not question the use, or God Forbid, that they might actually focus their endeavors on creating a commercial product that will actually sell."

I'm still mulling what I saw yesterday. It was heady.

Australians splurging on stocks: They must get in by June 30. From today's Sydney Morning Herald, one of Australia's leading newspapers::

AUSTRALIANS are plunging up to $80 billion into their superannuation funds just weeks out from the cut-off date for a once-in-a-lifetime tax windfall.

Real estate agents report multimillion-dollar loans are being taken out against property to plough into super, cashing in on the Federal Government changes, which take effect on July 1.

Empty-nesters are trading in the family home for smaller units and shifting the balance into superannuation.

The principal at Raine and Horne Double Bay, Michael Pallier, said he had just sold a $7 million Vaucluse property, on which the owners had taken out a multimillion-dollar loan so that $2 million of the proceeds could be put into super. After a 14-week settlement period the couple would pocket the gain and repay the loan, Mr Pallier said.

Under the changes introduced in last year's budget, investors will be limited to making after-tax super contributions of $150,000 a year, or $450,000 averaged over three years. But transitional rules allow contributions of up to $1 million between May 10 last year and June 30 this year.

The rush to beat the deadline has prompted a warning from the tax commissioner, Michael D'Ascenzo, for people to think twice before selling their assets.

He cautioned borrowers that interest payments on these loans were not tax-deductible. "It's important that people make the most of the changes, but at the same time are not caught out by [capital gains tax] liabilities that could arise down the track." ...

John Dani, manager of advice development for IPAC Securities, said financial planners were seeing unprecedented interest from investors wanting to beat the deadline, and it was stretching resources to the limit.

ING's head of technical services, Andrew Lowe, said demand for advisers was the highest he had seen during 17 years working in the industry. "I know advisers that quite literally drew down their shutters weeks ago in relation to seeing new clients."

While much of the money is expected to flow into super in the next two weeks, some funds are already reporting a doubling of normal contribution levels.

The executive director of Macquarie Bank, Neil Roderick, said Macquarie had received almost $11 billion in identifiable super contributions to its cash management and wrap accounts over the past three months, of which $2.1 billion came from contributions of $1 million.

A survey of 150 financial planners by Investment Trends in February/March found planners expected to place an extra $100 billion into super over the next three years as a result of the reforms. They said as much as 80 per cent of this money could be in place by June 30.

"People often overestimate and there are capacity issues because most financial planners are fully booked," said the principal of Investment Trends, Mark Johnston. "But what we've seen does suggest a final number somewhere in that $80 billion ball park."

AMP's director of savings and retirement, Peter Nicholas, said the biggest interest was coming from people in their 50s and 60s who would benefit most quickly from the Government's move to make super benefits tax-free from the age of 60. "They're switching money from a taxable to a non-taxable environment," Mr Nicholas said.

But Mr D'Ascenzo said: "With July 1 fast approaching, I want to remind people who sell assets to contribute extra money to superannuation to ensure that they have funds set aside to meet any tax liability from selling or transferring assets into super."

These liabilities could include tax on the capital gain made when selling the asset, stamp duty, legal and other fees and possibly GST. ...

Two key changes will apply from July 1:

+ Super benefits taken from age 60 will be tax-free - whether taken as a lump sum, or a pension. This means investors who now own investment properties, shares, or other assets can switch those assets into super where earnings will be taxed at a maximum of 15 per cent, or zero once they start to receive a pension.

+ Once they turn 60, they can withdraw the money without penalty.

+ To prevent abuse of the system, super contributions will be limited. After-tax contributions will be limited to $150,000 a year. This means it will take seven years to contribute the $1 million allowed this year.


+ If you sell an asset to contribute to super, you may be liable for capital gains tax, stamp duty, GST and transaction costs.

+ If you borrow to invest in super, interest on the loan is not tax deductible.

Rain boosts Hunter Valley wine makers: Remember that horrible drought in Australia? From Australia:

Rains that devastated parts of NSW have been labelled a "dream" for the state's Hunter Valley wine region, where dam levels are suddenly at 30-year highs.

NSW Tourism Minister Matt Brown toured the region on Wednesday declaring it open for business, despite the dousing it received over the long weekend, and wine makers and accommodation providers in the region were quick to agree.

"We weren't affected by floodwater at all. We really aren't in the bottom of a catchment area so we didn't have a problem," Amanda Tulloch, of fourth generation winemaker Keith Tulloch Wine, said.

"Some of the vineyards areas may have seen some washout of soil, but overall everyone is just thrilled by the amount of water we've now got for storage.

"We dreamed of rain and we've got rain, in reality we're all pretty smiling," she said. ...

The joy of driving
My taxidriver from La Jolla to Del Mar is 70+. He speaks five languages -- English, French, Spanish, Italian and Farsi. He's educated and cultured. What's his story, I ask?

"I was born in Vienna, lived most of my life in Persia (now Iran). I now live in La Jolla and own four taxis and six limousines."

Why drive a taxi?

"I can't stay at home. I'd go nuts. When I was young I used to race cars. I like driving."

Moral of this story: Get a job you enjoy and you'll never have to work again.

P.S. His son now runs the business.

The apocryphal Scottish story
A Scot is drinking In s Southampton bar.... He gets a call on his mobile phone. He hangs up, grinning from ear to ear and orders a round of drinks for everybody in the bar because, he announces, his wife has just produced a typical Scottish baby boy, weighing 25 pounds.

Nobody can believe that any new baby can weigh in at 25 pounds, but the Scot just shrugs, "That's about average up North, folks. Like I said, my boy's a typical Scottish baby boy."

Congratulations showered him from all around & many exclamations of "WOW!" were heard. One woman actually fainted due to sympathy pains.

Two weeks later the Scot returns to the bar.

The bartender says "Say, you're the father of that typical Scottish baby that weighed 25 pounds at birth, aren't you?

Everybody's been makin' bets about how big he'd be in two weeks.

We were going to call you... so how much does he weigh now?"

The proud father answers, "Seventeen pounds."

The bartender is puzzled & concerned.

"What happened? He weighed 25 pounds the day he was born."

The Scots father takes a slow swig from his pint, wipes his lips on his shirt sleeve, leans into the bartender & proudly says, "We had him circumcised".

San Diego woes: I worked from 7 AM yesterday to midnight, meeting inventors, entrepreneurs, hugely successful businessmen. I saw projects ranging from the highest tech (new ways of making energy) to the lowest tech (a bottled water plant). I saw an invention that could only be dubbed The Perpetual Energy Machine. My head is swirling. Am I getting too old to work for a living? No way! Several people I met yesterday were over 75. They're still investing in new deals, and talking about "being in for the long-haul." It was endearing. Me? I got jet lag. I'm exhausted.

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. Please note I'm not suggesting you do. That money, if there is any, may help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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