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Harry Newton's In Search of The Perfect Investment Newton's In Search Of The Perfect Investment. Technology Investor. Previous Columns
8:30 AM Thursday, June 23, 2005: Summer. Great tennis weather. Good investments are still possible to find. Just more work. And the weather is so nice. Our latest syndication in St. Louis (of all hot real estate places) will return to us investors 13% a year, with distributions beginning in August.

Good news: Commercial office building rents are rising and more tenants are appearing and actually signing long-term leases.

If you're hunting for a new house, Business Week makes a valid point:

You've hunted for a new house for months, and now you're ready to bid. But before you do, check one more indicator to see whether you're making a smart purchase: the types of mortgages home buyers in your market are choosing.

If lots of your prospective neighbors are taking out loans with low initial payments but much higher costs down the road, it could mean that they're stretching to buy houses they otherwise couldn't afford. That's a sign of an overpriced market.

The red lights are flashing in San Diego, Atlanta, San Francisco, Denver, and Oakland. Last year, they had the highest share of single-family-home mortgage loans that require just interest payments -- no principal -- in the early years. San Diego led overall with 47.6% of home buyers taking out interest only mortgages, up from 1.9% as recently as 2001.

Providence, Indianapolis, Houston, Pittsburgh, and Milwaukee are at the other extreme, with fewer than 8% of buyers going for interest-only mortgages last year. The data, which appeared first on BusinessWeek Online, were supplied by LoanPerformance, a San Francisco real estate information service. On a national basis, the LoanPerformance numbers closely track those of Fannie Mae Corp. and Freddie Mac Corp., even though those companies buy standard mortgages while LoanPerformance's numbers cover only big-ticket "jumbo" loans and subprime mortgages.

Why are interest-only mortgages a warning sign of a possible bubble? They tend to be most popular in overheated markets, where buyers are looking for every trick to make their monthly payments affordable. Initial payments on an interest-only mortgage are low because borrowers aren't required to pay any principal. But after a period of time -- from 2 to 10 years -- principal payments begin, and the monthly payment jumps by as much as 50%.

Be especially cautious of markets in which option adjustable-rate mortgages are hot. These loans offer borrowers extremely low teaser rates -- typically, just 1% for the first month -- and allow the option of making a minimum payment that may not even cover all of the interest owed for the month. The unpaid interest gets added to the principal, so the total owed can swell like a credit-card bill. Borrowers may be enticed by the introductory rate but unprepared for later payments on the swollen principal. Keith M. Schemm, a mortgage broker in Santa Clara, Calif., says option ARMs are "pretty dangerous loans to do" for many families. "The problem is there's such a frenzy in the marketplace to buy a home."

In assessing a market, also look at whether house prices are high relative to local incomes and relative to rental rates on equivalent properties, and at the health of the local economy. If major employers have recently closed, home prices are likely to head down. But if you're worried about buying at the top of the market, knowing what kind of mortgages your neighbors are choosing should help you make a more informed decision.

How much power does Cramer have? Last night he was pushing Microsoft (MSFT) and Cisco (CSCO). He gave no reason, except he had a "feeling" about broadband's growth. Let's see what they do today.

And I own a little GE:
General Electric says it has new policy regarding the use of corporate aircraft by its vice chairmen, requiring those executives to personally pay for any trips once their travel expenses have cost GE $200,000 for the year. According to GE, Vice Chairman Dennis Dammerman's aircraft use cost the company $503,933 in 2004 and $450,845 in 2003. These numbers represent GE's incremental costs, which include fuel and maintenance.

Personal use? I thought the planes belonged to the shareholders. When do I get my free ride on their 737? Yes, GE has one. God knows why.

How to make better digital photos: David Pogue of the New York Times recently ran 10 Suggestions. I put myself through college and grad school with photography. I've modified his suggestions. Here's our combined list:

1. END SHUTTER LAG. Most digital cameras have a shutter-lag problem. To solve, you can "pre-focus" -- hold the shutter button half-way down. Or buy yourself a more expensive, heavier, single-lens reflex for, typically, $1,000+.

2. DON'T BELIEVE THE MEGAPIXEL MYTH. More megapixels do not make a better camera. Megapixels measure the maximum size of each photo. For example, a four-megapixel camera captures pictures made up of four million tiny dots. Trouble is, camera companies hawk megapixel ratings as though they are a measure of photo quality, and lots of consumers are falling for it. In truth, the number of megapixels is a measure of size, not quality. There are terrible seven-megapixel photos, just as there are spectacular three-megapixel shots. (Lens and sensor quality are better determinants of your photographic results; too bad there are no easy-to-compare statistics for these attributes.)

Meanwhile, more megapixels means you have to buy a bigger, more expensive memory card to hold them. And you have to do a lot more waiting: between shots, during the transfer to your computer, and opening and editing.

Megapixels are something to think about only in two situations: when you want to make giant prints (20-by-30-inch posters, for example), and when you want the freedom to crop out a large portion of a photo to isolate the really good stuff, while still leaving enough pixels to make reasonably sized prints.

3. IGNORE DIGITAL ZOOM. In a further effort to market their way into your heart, camera companies also tout two different zoom factors: the optical zoom (usually 3X) and digital zoom (10X! 20X! 30X!).

Digital zoom just means blowing up parts of the photo. It doesn't bring you closer to the action or capture more detail; in fact, at higher settings, it degrades your photo into a blotchy mess. For best results, leave this feature turned off. The optical zoom number is the one that matters; it means a telephoto lens that brings you closer to the subject.

4. DITCH THE STARTER CARD. Unfortunately, it's a universal practice to include a very low-capacity memory card with the camera--a teaser that lets you take a shot or two while you're still under the Christmas tree. But it fills up after only four or five shots. When shopping for a camera, therefore, factor a decent-size memory card -- 512 megabytes -- into the price.

5. BEWARE THE FORMAT FACTOR. Memory cards come in an infuriating variety of sizes and shapes. The least expensive formats are Compact Flash (big and rugged, about $55 online for a one-gigabyte card; available in capacities up to eight gigabytes) and SD (about $70 online for a one-gigabyte card; maximum two gigabytes). Most Olympus and Fuji cameras require XD cards (about $85 online for a one-gigabyte card, the maximum), and most Sony cameras require either the Memory Stick Pro (about $90 online for a one-gigabyte card; maximum four gigabytes) or the smaller Memory Stick Duo (about $115 online for a one-gigabyte card; maximum two gigabytes).

Check if your camera's memory card will fit your laptop. That makes transferring pictures very easy.


7. KNOW YOUR CLASS. Cameras, like cars, come in several different classes with different pros and cons. There are card cameras, no larger than a Visa card and less than an inch thick (gorgeous and very convenient but with few manual controls and short battery life); coat-pocketable cameras (bigger, but still self-contained with built-in lens covers, longer battery life and more features); semipro zoom models (too big for a pocket but with built-in super-zoom lens ); and S.L.R. models (endless battery life, no shutter lag and astonishing photos). I prefer S.L.R. cameras. I own the Nikon D100 with three digital lenses -- the 24mm, 35mm and 85mm.

8. BUY AN EXTERNAL FLASH. I own a Nikon Speedlight SB-800. It's expensive -- $300 -- and heavy -- a pound. It's so powerful, I can bounce light off ceilings and walls. The results are stunning. No harsh light. No harsh shadows. The flash that came with your camera is weak. A typical digital camera's flash has a range of about eight feet. In other words, using it at the school play does nothing but fluster the performers.

9. TURN ON THE FLASH. Use fill-in flash to cut shadows. Kids look better with fill-in flash. Women also.

10. TURN OFF THE SCREEN. The back-panel screen is the No.1 consumer of your battery power. Use the optical viewfinder..

How to get PR for yourself: I received this email yesterday:

Quincy Long is an attorney with Entrust. Their specialty is IRA's.

I think anyone who would start a conversation with Quincy would be impressed with his depth of knowledge and experience in the real world application of Real Estate Transactions within an IRA, Roth or otherwise.

Quincy is very easy to have a conversation with, and wants his clients to understand the nature of a transaction. Quincy, continually strives to find new creative ways to use this resource.

I am sure you would be pleased if you contacted Quincy and had a conversation with him.

Robert Karr

"You have successfully updated your password." You obviously haven't. But you've just received an email telling you. Beware the email contains a nasty attachment. Do NOT open it.

Every store and their uncle is holding a summer sale: Nordstrom, Eddie Bauer, Banana Republic, Duluth Trading, Pottery Barn and others have sent emails with their "up to 50% off" summer sales. Might be a good time to buy some Christmas presents.

I don't make this stuff up: This is Edmond Knowles using a Coinstar coin-counting machine to count his penny collection in the lobby of the Escambia County Bank branch in Flomaton, Alabama. Knowles has been collecting the coins for 38 years, storing them in 55 gallon drums in his garage. I wonder what his investment objective (if any) was?

A fiftyish woman was at home happily jumping on her bed and squealing with delight. Her husband watches her for a while and asks, "Do you have any idea how ridiculous you look? What's the matter with you?"

The woman continues to bounce on the bed? and says, "I don't care. I just came from having a mammogram and the doctor says I have the breasts of an 18 year-old."

The husband said, "What did he say about your 55-year old ass?"

She replied calmly, "Your name never came up."

Southern women definitely have class.
Two nicely dressed ladies happen to start up a conversation during an endless wait in the LAX airport.

The 1st lady was an arrogant California woman married to a wealthy man. The second was a well mannered elderly woman from the South.

When the conversation centered on whether they had any children the California woman started by saying, "When my first child was born, my husband built a beautiful mansion for me. "

The lady from the South commented, "Well, isn't that precious?"

The first woman continued, "When my second child was born, my husband bought me a beautiful Mercedes-Benz. "

Again, the lady from the South commented, "Well, isn't that precious?"

The first woman continued boasting, "Then, when my third child was born, my husband bought me this exquisite diamond bracelet.

Yet again, the Southern lady commented, "Well, isn't that precious?" The first woman then asked her companion, "What did your husband buy for you when you had your first child? "

"My husband sent me to charm school, " declared the Southern lady.

"Charm school?" the first woman cried, "Oh my God! What on earth for?"

The Southern lady responded, "I learned that instead of saying 'Who gives a shit?'I learned to say, 'Well, isn't that precious?'"

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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