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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 Thursday, June 8, 2006: In every gray cloud, there's a silver lining. And other comforting aphorisms. Qwest is rising. Absolute is finding lost laptops. The home builders, great shorts, are plummeting. And there are bargains around in real estate.

The key to real estate: It's the price you pay. You can't affect (that's the key word) all the other variables -- the rent you get, how much you borrow, how much you pay for the bank loan, the price you sell it, the local community (if it booms or busts), etc. But you can affect the price you pay. Buy a building for $1 million. Buy the same building for $2 million. The $1 million building will be much more profitable.

There are several keys to buying cheap:
First, don't fall in love with it.
OK. It's pretty. It has great views. It's in the right part of town, etc.. Falling in love is the big mistake people make buying homes. But it happens in commercial real estate. Remember when the Japanese bought Manhattan and the prices they paid?
Second, don't fantasize you can work magic. You can paint it. You can fix the lobby. You can plant pink flamingos on the front lawn. So can everyone else. And everyone else does.
Third, think cash flow, not capital appreciation. Holding real estate is an expensive business. You do not want to take money out of your pocket every month to pay your building's expenses.
Fourth, be patient. Put your offer in and go play tennis. True story: my friend put his $2 million offer in nine months ago. It got accepted yesterday. He told me after we played tennis last night.
Fifth, work with a good broker. Your broker should keep reminding the seller there's a legitimate offer on the table i.e. yours). And when all the other offers fall through, this one will be there. That's what my friend's broker did for the last nine months, as he played tennis and as the all the other flaky offers (including one for $2.5 million) fell by the wayside.
Sixth, recognize that there are other buildings around. If you lose this one you'll find another tomorrow. And tomorrow's will be better. I'll give you that guarantee in writing.

Oh yes, I forgot. Bid low. In fact, bid ridiculously low. Let the seller be offended. In fact, only if the seller reacts offended, do you know your offer is perfect. But as the weeks tick away, and the buyers fall by the wayside and his property languishes unsold, sucking money every month out of his bank account, he'll come to see your ultra-low bid as his savior.

Another positive for Absolute Software (ABT.TO): Yesterday the American Institute of Certified Public Accountants (AICPA) confirmed that a computer hard drive containing the unencrypted names, addresses and Social Security numbers of nearly all of its 330,000 members has been missing since February.

Remember Absolute? They're the company that puts software on computers that help the police find retrieve stolen machines. As I explained on May 30,

Absolute's software, called Computrace, works by sending a regular signal from a computer to the company's data center in Vancouver, British Columbia. The signal, sent daily when a computer is online, provides important information that can be used to locate the machine, such as the computer's IP address and serial number. When a computer is reported stolen, Absolute flags the machine and asks it to signal the data center every 15 minutes. When the machine logs on to the Internet, Absolute knows it almost immediately and gives information to police to help recover the computer and apprehend the thief.

The hedge fund manager who turned me onto absolute has had his analyst calling users of Absolute. "Guess what their recovery rate is?" my manager gleefully asks. And the answer is -- drum roll -- "100%!"

Absolute's software is a bargain at only $129 per computer for three years. Putting Absolute's software on every laptop in corporate America is an absolute no-brainer. This will happen.

Updated list of home builders:

These guys are cratering. Typical charts:

Why gold?
I've never invested in gold. I never understood it. On April 12, the Wall Street Journal neatly explained gold's dynamics:

After gold soared above $500 an ounce a few months ago, tub after plastic tub of gold jewelry from the Middle East and India began arriving at Darren Morcombe's refinery in southern Switzerland. In a part of the world where gold jewelry is as much an investment as an adornment, consumers and jewelers had decided the shiny bracelets, necklaces and belts -- many never worn -- were suddenly too valuable to keep.

As prices skyrocket for one of the oldest forms of money, the rules of normal economics don't apply. Fears about inflation, terrorism and a possible dollar decline are driving gold's price up. But production is down, because mining companies cut back capital investment during a 1990s price slump.

Some central banks, the biggest gold investors, sold when the price was low, and now a few are buying when the price is high. The jewelry industry buys the bulk of each year's output, but price today is driven more than ever by a much smaller slice of the market -- professional investors -- whose appetite lately has soared. After years of being squeezed, gold miners are making fortunes, while refiners and gold bankers are getting pinched.

The price, in retreat for almost two decades after peaking at $847 in 1980, has more than doubled in the past five years, closing yesterday in New York at $595.20 a troy ounce, near a 25-year high. Purchases by investors jumped more than 25% by weight in 2005 alone.

Gold is the only major commodity that isn't produced primarily to be consumed in the economy -- like iron, copper, pork bellies or oranges -- but simply to be owned and admired. It is too heavy, soft and rare to have many practical uses outside of electronics and dentistry. Yet it is one of the earth's most prized objects, valued mostly because it is considered valuable.

Something about lawyers: I buy a packet of Tylenol Simply Sleep to put me to sleep on next week's long plane ride and the package contains a warning, "When using this product drowsiness may occur." Dah!

The French Open Tennis is continuing. Set your TiVo or PVR.

French Open Tennis
Time (EST)
Thursday, June 8
1:30 AM to 3:00 AM
8:00 AM to 3:00 PM
Friday, June 9
1:00 AM to 4:30 AM
6:00 PM to 8:00 PM
Saturday, June 10
1:00 AM to 4:30 AM
9:00 AM to 12:00 PM
Sunday, June 11
9:00 AM to 2:00 PM
For more, click here or here.

Long distance calling
At her father's wake, a woman told her priest that ever since she was a child she and her father had discussed life after death. They had agreed that whomever went first would contact the other. They had discussed this again just two weeks before his death.

He died in her home and a few days after his death the smoke alarm in her garage went off. She had lived there 28 years and it had never gone off before. She couldn't turn it off so she called the security company that installed it.

The next morning the smoke alarm sounded again and the reason finally dawned on her. She said aloud, "Ok dad, I missed the signal yesterday but I get it now! Thanks for letting me know that you are safe on the other side.

Now turn the thing off so I don't have to call the security company again." The alarm fell silent.

She immediately called her priest to tell him the good news. He replied, "Dear lady, if every time your father sends you a message he sets off the smoke alarm, just where do you think he's calling from?"

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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