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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, Friday, March 2, 2007: Berkshire Hathaway continues to do well. From 1965 to 2006, he achieved a compounded annual gain of 21.4%. Buffet's annual report letter is always worth reading. Click here. Some excerpts:

Our gain in net worth during 2006 was $16.9 billion, which increased the per-share book value of both our Class A and Class B stock by 18.4%. Over the last 42 years (that is, since present management took over) book value has grown from $19 to $70,281, a rate of 21.4% compounded annually.*

We believe that $16.9 billion is a record for a one-year gain in net worth - more than has ever been booked by any American business, leaving aside boosts that have occurred because of mergers (e.g., AOL's purchase of Time Warner). Of course, Exxon Mobil and other companies earn far more than Berkshire, but their earnings largely go to dividends and/or repurchases, rather than to building net worth.

All that said, a confession about our 2006 gain is in order. Our most important business, insurance, benefited from a large dose of luck: Mother Nature, bless her heart, went on vacation. After hammering us with hurricanes in 2004 and 2005 - storms that caused us to lose a bundle on super-cat insurance - she just vanished. Last year, the red ink from this activity turned black - very black.

In addition, the great majority of our 73 businesses did outstandingly well in 2006.

Berkshire Hathaway is now mostly an insurance company. He writes:

Let me focus for a moment on one of our largest operations, GEICO. What management accomplished there was simply
extraordinary. As I’ve told you before, Tony Nicely, GEICO’s CEO, went to work at the company 45 years ago, two months after turning 18. He became CEO in 1992, and from then on the company’s growth exploded.

In addition, Tony has delivered staggering productivity gains in recent years. Between yearend 2003 and yearend 2006, the number of GEICO policies increased from 5.7 million to 8.1 million, a jump of 42%. Yet during that same period, the company’s employees (measured on a fulltime-equivalent basis) fell 3.5%. So productivity grew 47%. And GEICO didn’t start fat. That remarkable gain has allowed GEICO to maintain its all-important position as a low-cost producer, even though it has dramatically increased advertising expenditures. Last year GEICO spent $631 million on ads, up from $238 million in 2003 (and up from $31 million in 1995, when Berkshire took control). Today, GEICO spends far more on ads than any of its competitors, even those much larger. We will continue to raise the bar.

Master Limited Partnerships are a new asset class: From Alerian Capital Management's web site:

Master Limited Partnerships, or MLPs, are primarily engaged in the transportation, storage, or processing, of natural resources such as crude oil and natural gas. By confining their operations to these specific activities, they are able to trade on public securities exchanges exactly like the shares of a corporation, without entity level income taxation. More than two-thirds trade on the New York Stock Exchange. MLPs are regulated by the Securities Exchange Commission and must file 10-Ks, 10-Qs, and notices of material change like any publicly traded corporation and comply with the recordkeeping and disclosure requirements of the Sarbanes-Oxley Act.

Since 1996, the market capitalization-weighted index of MLPs has generated compound annual returns exceeding 17%, under the radar of the professional investment community. These strong returns were generated through a combination of current yield and consistent annual distribution growth of 8%-9% over the period driven by uniquely attractive business models.

Alerian's industry piece, "Master Limited Partnership Primer: Understanding an Emerging Asset Class", describes the changing dynamics in the energy space today that are shaping the future direction of the MLP sector, as well as a history of the asset class and a basic introduction for new investors in the midstream space. This piece also provides an explanation of the different asset types within the MLP structure and discusses the different aspects of the midstream value chain and the transported products.

For the 38-page piece (something to read over the weekend), click here.

Pick up a free trial copy of Argus. The Argus software is the Excel of the commercial real estate industry. Everybody uses it to figure out if buying that building makes sense. I've never used it but I've seen the results and heard my friends extol its expensive virtues. For some reason, they're offering a free trial copy of Argus. Click here. Be wary. The download is huge -- 132 megabytes. Download at lunch or in the evening. I don't know how long the trial lasts.

How to boost your cellphone: The New York Times went shopping for ways to boost more bars out of your cellphone. It found three ways. The first (photo on left) is a $34.95 passive antenna called Freedom Antenna. You have to have an antenna port on your cell phone which you can plug into. Nokia and BlackBerry owners are out of luck. For more, click here.

The second (center photo) is the $299 Spotwave Z1900 amplified antenna. It works only with 1900 MHz services, which include Sprint, T-Mobile and some Cingular areas. You can check if you're covered by punching your ZIP into Spotwave’s Web site, The third (far right) is the $399 zBoost from Wi-Ex. This thing works at both 800 Mhz and 1900 MHz and thus works for most US cellphone companies, including Verizon, but not Nextel. Don't expect magic from all three. You will get an improvement. If your house gets lousy receiption, these gadgets are for you. For the amplified boosters to work, you should be speaking from a cell phone close to their indoor antennas. For the the entire Times piece, click here.

Lawyers, Lawyers and more lawyers: Don't get me started. I bought my dictionary back in December. I signed a distribution agreement with PGW (Publishers Group West). Within three weeks (my luck), PGW's parent, AMS (Advanced Marketing Services) went Chapter 11. Then the Judge and the lawyers took over. It was the 2007 Lawyers' Full Employment Act all over again. Little of the paperwork they generated made any sense. One document had eight lawyers from four separate firms draft. You can imagine what it read like. They had "Whereas-es" and "Recitals" up the ying yang. The book publishers who were now owed zillions by PGW hired even more lawyers... And the bankruptcy judge who understands nothing about the book publishing industry tried to figure it all out. The businessmen were overwhelmed. The lawyers did their normal "fear" sales act. So the businessmen let the lawyers take charge. BIG MISTAKE! The end of it all will give "GIGANTIC EXPENSIVE MESS" a whole new meaning. My favorite: this morning I had to sign a 10-page document titled (I don't make this up) "Stipulation providing for Rejection of Executory Contract and Request for Entry of any Order Approving the Stipulation." The document gave the bankrupt company my blessing to break their distribution contract with me. As if they needed my permission. What they (the lawyers) did need was the fees and expenses from all the paperwork and all faxing -- including Exhibit A which was completely blank and never mentioned in the document. Go figure!

The blondes at the lumber yard
A couple of blond men in a pickup truck drove into a lumberyard. One of the blond men walked in the office and said, "We need some four-by-twos."

The clerk said, "You mean two-by-fours, don't you?"

The man said, "I'll go check," and went back to the truck. He returned a minute later and said, "Yeah, I meant two-by-fours."

"Alright. How long do you need them?"

The customer paused for a minute and said, "I'd better go check."

After awhile, the customer returned to the office and said, "A long time. We're gonna build a house."

The two kids
Two little kids are in a hospital, lying on stretchers next to each other, outside the operating room.

The first kid leans over and asks, "What are you in here for?"

The second kid says, "I'm in here to get my tonsils out and I'm a little nervous."

The first kid says, You've got nothing to worry about. I had that done when I was four. They put you to sleep, and when you wake up they give you lots of Jell-O and ice cream. It's a breeze."

The second kid then asks, "What are you here for?"

The first kid says, "A circumcision."

The second kid replies, "Whoa, good luck buddy, I had that done. Couldn't walk for a year."

Till Death do us Part
A husband and wife go to a counselor after 15 years of marriage.

The counselor asks them what the problem is and the wife goes into a tirade listing every problem they have ever had in the 15 years they've been married. She goes on and on and on.

Finally, the counselor gets up, goes around the desk, embraces the woman and kisses her passionately.

The woman shuts up and sits quietly in a daze. The counselor turns to the husband and says "That is what your wife needs at least three times a week. Can you do that?"

The husband replies, "Well, I can drop her fat ass off here on Mondays and Wednesdays, but I play golf on Fridays."

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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