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8:30 AM Monday, June 27, 2005: So the housing bubble might last a bit longer? (Don't tell that to the home builders, whose stocks are cratering and are all well below their year's highs.) From this morning's New York Times:

Federal Reserve officials, who meet this week, are beginning to suspect that the perplexing decline in long-term interest rates is more than a temporary aberration. The possibility has major implications for the economy, and it creates new puzzles for Fed officials on how they should respond.

On Thursday, the Fed is all but certain to raise the federal funds rate on overnight loans between banks by another quarter point, to 3.25 percent. That would be the ninth increase in the last year, and the central bank is expected to signal that it will continue to raise overnight rates at a "measured" pace.

But the real debate at the meeting is expected to be about the unexpected decline of long-term interest rates, which have kept mortgage rates at their lowest level in decades and fueled what many analysts fear is a bubble in housing prices.

Alan Greenspan, chairman of the Federal Reserve, said in February that the low long-term rates were a "conundrum" but might simply be a "short-term aberration." But Mr. Greenspan and other senior officials are now suggesting that the change is more enduring. The debate is over why the change has occurred, and different theories lead to sharply disparate conclusions about the best way to respond.

"My sense is that people think this could be the new reality, that this could be fundamental, that it could be long-lasting," said Laurence H. Meyer, a former Fed governor and now vice chairman of Macroeconomic Advisers, a forecasting firm.

Mr. Greenspan, testifying before Congress earlier this month, described the trend as profoundly important and "clearly international in origin."

"How we integrate it into the basic underlying monetary policy structure is something we're spending a considerable amount of time on," he added.

The term premium - the added payment that investors demand to cover the uncertainty of holding long-term bonds - has shrunk to almost nothing. Investors appear to assume that the overnight rate will be about 3.75 percent by the end of this year. But the yield on 10-year Treasury bonds remains about 4 percent.

One school of thought holds that low bond yields are a harbinger of slowing economic growth, which would reduce demand for credit in the future. Another school holds that global investors have lower inflation expectations than in the past, which reduces the risk of holding long-term bonds. If either theory is correct, the Federal Reserve would have less need to fend off inflation and could stop raising short-term rates at a much lower level than in the past -- perhaps below 4 percent.

But yet another theory holds that long-term interest rates may have been depressed by other factors, including a "savings glut" around the world and efforts by Asian central banks to keep the value of their currencies down by buying United States Treasury securities. If that is true, the flood of foreign money into the country could be diluting the Fed's effort to prevent inflation. That would imply that the Fed needs to raise rates more than many investors are expecting....

Mr. Greenspan, asked by lawmakers to specify a "neutral" Fed funds rate - one that would try to neither speed nor slow the economy - has periodically remarked that people would know it when they saw it. But in his most recent testimony, he added a twist: people would know it because "we will observe a certain degree of balance which we have not seen before" in the economy.

In other words, he hasn't got a clue.

In praise of experts: I'm joking, of course. I don't trust experts. I take their advice only after I've checked my choices through research (usually on the Internet) and by talking to several experts. Never, ever trust just one expert. KPMG is a large and allegedly reputable accounting firm. Among their activities are auditing the financials of public companies. This not a lucrative business, although it's about as close to blackmail as you can get. "Pay my bill or your accounts won't pass muster." So KPMG comes up with new, even more lucrative services to provide. Consulting is the main one. Tax avoidance advice is another one. How profitable has this business been? Pretty damn good. From Saturday's New York Times:

If you've been following the KPMG story, you know two things. First, its actions were truly reprehensible. A 2003 investigation by the Senate Permanent Subcommittee on Investigations leaves no ambiguity: the firm absolutely knew the shelters it was devising would probably not pass muster with the Internal Revenue Service, but sold them anyway. Everything about these products and the way they were marketed was sleazy. The smallest of the Big Four, KPMG used them to bolster revenue - they are said to have generated $124 million in fees for the firm - and the executives involved were rising stars. In the Enron debacle, Andersen's fundamental sin was spinelessness; its auditors weren't willing to stand up to a high-paying client determined to bend (and break) accounting rules to post fictitious profits. Though it affected fewer people, KPMG's behavior was more mendacious.

Yet the word now seems to be that the Justice Department will probably not indict the firm. This is partly because KPMG has belatedly apologized, admitted the tax shelters were "unlawful," and cut adrift its former rising stars (and tried to shift the blame for the shelters to them). And it is working to come up with a deal with prosecutors that, however painful, will fall short of the death penalty.

But it's also because the government is afraid of further shrinking the number of major accounting firms. Remember when people used to say that the major money center banks were "too big to fail"- meaning that if they ever got in real trouble the government would have to somehow ensure their survival? It appears that with only four big accounting firms left, down from eight 16 years ago, there are now "too few to fail." How pathetic is that?

IF you ask accounting experts about the state of the profession, post-Enron, they'll say that by and large accounting has become at least marginally better, if only because accountants have had the fear of God put into them.

The 2002 Sarbanes-Oxley ethics law eliminated some of the most egregious practices like using auditing, which ought to be a firm's primary responsibility, as a loss leader to encourage companies to buy their higher-profit consulting services. Sarbanes-Oxley also created a commission called the Public Company Accounting Oversight Board to oversee the profession. And it mandated that companies test their internal financial controls to help ensure that fraud can't slip through. This task has been handed to the accounting firms.

In favor of Checklists: Watch the pilot and the co-pilot. As they begin their descent, one reads the necessary tasks to the other. One does the tasks, acknowledges they're done. Then they move onto the next one. Each day's column involves writing, coding and checking. I have a Checklist, which I follow. It ends with "Check the column on the web" -- as any reader would. I learned two things from Friday's temporary mess. First, different browsers see sites dramatically different. Friday's site looked fine in Mozilla Firefox, but not in Internet Explorer. Second, when I paste a table in (like the TV Schedule for Wimbledon tennis), it often comes with coding baggage. My job is to get rid of that code and make it simple. I got rid of most of it on Friday. And it looked good in Firefox, but lousy in Internet Explorer.

The moral of this story for all us -- is to have to have at least two browsers. My choice is IE and Firefox. If a site looks weird in one browser, try the other.

Traveling this summer? Rule number 1: Assume your airline will lose your bags. Carry enough clothes and toiletries with you so you can live a few days in relative comfort.

Credit card debt is the best investment: I'm guessing if you're reading this column, you don't carry a balance on your credit card. But your children? Explain to them they can never earn on any investment what the credit cards charge them on interest -- often well over 20% a year.

Skin in the game: How much does the manager have in your investment/fund/venture? He can still screw up your and his money. But he's less likely to.

Getting a new cell phone? The only thing to look for is Bluetooth, a short-distance wireless communications system. The best use for Bluetooth is a featherweight, cordless earpiece/headset. Test your earpiece before you leave the store. Moto Razr from Motorola is today's hottest phone, but not worth changing to Cingular, which has an exclusive on it -- for now.

Wimbledon Tennis continues this week: Here's the schedule:

Profound thoughts to begin the week:
+ The journey of a thousand miles begins with a broken fan belt and a leaky tire.

+ Always remember that you're unique. Just like everyone else.

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

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

+ If you tell the truth, you don't have to remember anything.

+ Good judgment comes from bad experience, and a lot of that comes from bad judgment.

+ There are two theories to arguing with women. Neither one works.

+ Generally speaking, you aren't learning much when your lips are moving.

+ Never take a sleeping pill and a laxative on the same night.

+ There is a fine line between "hobby" and "mental illness."

+ Someone will always find a way to take it too seriously.

+ Everyone seems normal until you get to know them.

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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