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8:30 AM EST Thursday, June 1, 2006: Revelation! I email my friend, the ultra savvy investor, asking him if he wants in on a loan deal paying 13%. He replies, "Sir: (I like that) Thanks but no thanks. Enjoy all your ordinary income in good health."

That night I can't get his comment out of my brain. Ordinary income. He's right. It sucks. My fantastic 13% magically becomes a sucky 7.8% after Uncle Sam and New York State and New York City get their grubby hands on my hard-earned ordinary income.

Capital gains aren't free, but they are cheaper. They cost 15% Federal and 12% local -- it's not cheap to live in New York. But 27% is better than 40%.

There is no logic to taxes. The difference between ordinary income and capital gains can be as little as one day. The key:

Live your ordinary life on non-ordinary income. Make everything a capital gain.

Panic or Euphoria? If you're an analyst, you're paid to analyze and to publish -- even if you have zero idea of what's going on. This priceless piece called "The Unlikely Crucible" published today and written by an analyst at Citigroup Research. Note that we have been in "panic" for the last several years -- a time when stockmarkets have risen strongly. Note also that recently "panic" has ebbed, despite May's awful markets.

Email is no longer reliable: Too much of its gets blocked by a junk mail filter or simply disappears into the Etherware. Solutions:

1. Beg to be added to people's "safe sender" list.
2. End each email with a question, e.g. OK?
3. Follow up email with a second one, "Did you receive my email about the gold bullion I'm sending you?"
4. Don't include four letter words, naked ladies or anything that would offend a narrow-minded, conservative in the deep south. (You'd be surprised how prudish some firms are.)
5. Call on the phone. Leave a voice mail. But don't assume anyone will listen to it.
6. Print your email out and snail mail it. Yes, people still read their papermail -- especially if you handwrite the envelope.

May was the worst in 22 years. Many hedge funds will show huge losses. Many will fold up their tents and fade into the night. But a bad loss in May is not the reason for you to fold up your tent and get your money back. It's time to call your hedgie and ask "So, what did May teach you?" Key question: What's your policy on maximum positions? One of mine has dropped his maximum exposure from 12% of his portfolio to 8%. That should limit his fund's volatility if things go wrong. It will also limit his upside. But, then the name of the game is capital preservation. It's important for your hedgie to learn that a dollar down is far more pain than a dollar up is pleasure.

All good things come home to roost: I now have a mild case of "tennis elbow." Not one of my friends knows how to fix it. All of them think it's just reward for someone who plays tennis during the day when he should be working and they certainly are. Perhaps a cortisone shot? My coach says "play through it." His prices reflect he enjoys inflicting pain.

Beware of toothpicks and pickpockets:
+ A toothpick is the object most often choked on by Americans.
+ My wife tells me the local Starbucks is a scene of purse snatching and pickpocketing After paying Starbucks' prices I can't imagine anyone has any money left.

I like ballet: This is from last night's Donizetti Variations danced by the New York City Ballet and performed at Lincoln Center. Please come to the ballet next time you're in New York.

Megan Fairchild and Joaquin De Luz

The French Open Tennis has begun. Set your TiVo -- but don't buy TiVo's stock. Its results of late have been miserable.

The stud rooster's profound wisdom
A farmer went out one day and bought a brand new stud rooster for his chicken coop. The new rooster struts over to the old rooster and says, "OK, old timer, time for you to retire."

The old rooster replies, "Come on, surely you cannot handle ALL of these chickens. Look what it has done to me. Can't you just let me have the two old hens over in the corner?"

The young rooster says, "Beat it: You are washed up and I am taking over."

The old rooster says, "I tell you what, young stud. I will race you around the farmhouse. Whoever wins gets the exclusive domain over the entire chicken coop."

The young rooster laughs. "You know you don't stand a chance, old man. So, just to be fair, I will give you a head start."

The old rooster takes off running. About 15 seconds later the young rooster takes off running after him. They round the front porch of the farmhouse and the young rooster has closed the gap.

He is only about 5 feet behind the old rooster and gaining fast. The farmer, meanwhile, is sitting in his usual spot on the front porch when he sees the roosters running by. He grabs his shotgun and - BOOM - he blows the young rooster to bits. The farmer sadly shakes his head and says, "Darn.....third gay rooster I bought this month."

Moral of this story? ....
Don't mess with old timers. Age, skill, wisdom, and a little treachery will always overcome youth and arrogance!

The logic of time
The farmer is holding the pig up to the tree while the pig eats acorns on the tree. A city slicker passing by says "Sir, there's a better, more efficient way. We shake the tree. The acorns fall to the ground. The pig eats the acorns. This way you'll save time."

The farmer, continuing to hold the pig up to the tree, replies, "What's time to a pig?"

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. 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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