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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, May 17: Reader Steve Pedian writes, "Good, safe call on GSF. However I think a more attractive co. is Rowan Co. (RDC). Like you, I believe the offshore-drilling business environment is extremely attractive currently, and I expect this trend to continue for a very long time. RDC has no net debt while selling at less than 9x this year’s earnings. With a shortage of jack-up rigs internationally along with a balance between demand and supply in the Gulf of Mexico, offshore drilling day rates are extremely attractive for Rowan."

Here's Rowan's recent chart:

Here's a description of Rowan from the Wall Street Journal's company research:

Rowan Companies, Inc. (Rowan) is a provider of international and domestic contract drilling services. The Company also owns and operates a manufacturing division that produces equipment for the drilling, mining and timber industries. It provides contract drilling services utilizing a fleet of 21 self-elevating mobile offshore drilling platforms (jack-up rigs) and 26 land drilling rigs. Rowan's drilling operations are conducted primarily in the Gulf of Mexico, the Middle East, the North Sea, offshore eastern Canada and in Texas, Louisiana and Oklahoma.

Rowan sales last year rose 41.4%, with net income up 38.5%.

Cash tsunami warning; Equity predicted to quadruple.
That's the heading on today's story by Victoria Young of the Australian InvestorDaily.
(AXA is one of the largest insurance companies in Australia.)

Funds avalanche sparks a global investment opportunity, AXA believes.

AXA chief investment officer Mark Dutton has joined an expanding group of experts warning of a cash tsunami about to hit the Australian share market.

Fund managers looking for a home for investment money should seize the opportunity to look globally, Dutton advised. "The bottom line is that the money has got to go somewhere," Dutton told InvestorDaily.

"Inevitably, if the funds can't find a good sensible investment in Australia, much will go overseas. This is a good opportunity to diversify into global markets and reduce the bias to domestic markets."

The excess demand for equities is estimated at $44 billion for the 2007 calendar year, compared to $10 billion last year, according to a Credit Suisse report.

Strong demand from pension funds, private equity and the Government Future Fund has driven unprecedented demand in 2007, the Expensive but in high demand report stated.

Inflows to the Australian share market will total an estimated $81 billion, but there will be only $37 billion of new listings and capital raisings.

Credit Suisse estimates cash from net super inflows will be $12 billion, investment demand from the Government's Future Fund to be $5 billion, inflows of $3 billion as a result of the federal budget changes to super, $15 billion in merger, acquisitions and buy-out activities and $46 billion in dividends and buy-backs.

"This is a good opportunity to think about the relative allocation between Australian equities and global equities and consider whether it may be appropriate to use some of the extra funds to put into super into global funds," Dutton said.

Dutton added that Australian shares were no longer cheap in terms of price-to-earnings ratios compared with US, European and Asian markets.

They may no longer be "cheap." But Australians have until June 30 to get $1 million tax-free into their super funds, which many manage themselves (in contrast to here). And the money's pouring into Australian equities, as evidenced by:

Renting out the son's apartment: Son Michael is off to B school for two years. So we have rented his two-bedroom New York City apartment for two years at $6,300 a month. That seems like a lot. I remember when I paid $360 for a big one-bedroom. I did the math. Take the $6,300, deduct the maintenance and the taxes (oih, the taxes) and we have a 3.20% return on the price of $1,475,000, less than the cost of a mortgage (if we had one).

That is not a brilliant return, but it is positive one. Going forward, can we assume a 5-7% annual increase in value, bringing the investment to an 8-10% range? Perhaps, yes. Perhaps, no. Most likely no. There are two big issues with this "investment:" First, it's not liquid. Second, sales brokerage is likely to be an outrageous 6% (assuming we use a broker). Conclusion: It probably makes more sense to rent and use your money more productively elsewhere.

Once an entrepreneur, always an entrepreneur. A dear friend visited me yesterday. A talented fellow, who's now in a pickle. He has no money. He made some serious mistakes. He sold his business for over-priced shares, which later collapsed. He forgot to take money off the table. Cash is better than script. He moved continents, losing all his contacts. He got divorced. He must now remain near his young son whom he adores.

What now? He can't start a new business. He has no money. Headhunters won't touch him. He's an entrepreneur. He can play "consultant." But getting that business off the ground today without contacts is not easy. He's mining the few contacts he left in North America, like me. But I haven't had a real job or real company in ten years. I'm next to useless. Most would say useless.

Are there any lessons here? There's the obivous one: Take money off the table early on. Put it in something reasonably safe, a Vanguard index fund and some muni bonds. There's the less obvious: It's real difficult to be a serial entrepreneur, i.e. starting one successful business after another. You may not have a great idea for five years. I've been there. Meantime, there are expenses to meet, rent to pay (if you forgot to buy).

What to do now? He won't starve. Eventually he'll find something. Meantime, it's a seriously scary time. Sometimes we won't count our blessings often enough.

A harmless drudge: My children used to delight in telling their teachers their dad (i.e. me) was a lexicographer. They'd watch their teachers look puzzled. What perversion was their father involved in? Last night, I checked the dictionary (not mine). What actually is a lexicographer? According to Merriam-Webster, he's "an author or compiler of a dictionary." That's right. The best part was a quote by Samuel Johnson, a man of great learning. He said that "a lexicographer was a harmless drudge that busies himself in tracing the original, and detailing the signification of words." I like that. If had been his editor (oih, that again), I would have changed "that" to "who."

The Wolfowitz saga continues. How come someone allegedly intelligent can get themselves into such a pickle? From today's Wall Street Journal online:

The art of the possible, a classic example of Catch 22, call it what you will -- there is something illustrative about power and bureaucracy in Paul Wolfowitz's willingness to leave the World Bank but only on the condition that his resignation isn't attributed to the reasons that are forcing him out.

Though a panel of the poverty-fighting institution's board has declared him guilty of violating ethics rules and his own contract by dictating the terms of his girlfriend's raise and promotion, Mr. Wolfowitz is "adamant that he be cleared of wrongdoing" before he resigns, people familiar with his thinking tell the New York Times. ...

Married life.
In the first year of marriage, the man speaks and the woman listens. In the second year, the woman speaks and the man listens. In the third year, they both speak and the neighbors listen.

Isaac & Sarah – part 1
Isaac gets home late after attending his friend’s leaving party in the City. As soon as he walks in, there is his wife, Sarah, waiting for him.

Sarah looks at Isaac and says angrily, "Can you explain to me, Isaac, how this large red lipstick mark got onto your shirt collar?"

"No, I can't," Isaac replies. "I don’t know how it happened - I distinctly remember taking off my shirt."

Isaac & Sarah – part 2
The next morning, they are still arguing. Just before leaving for work, on his way out of the door, Isaac shouts at Sarah, "You’re not even good in bed."

When Isaac returns home after work that day, he looks for Sarah. He goes upstairs and notices that the bedroom door is closed. He goes in and there is Sarah in bed with his best friend.

"What are you doing?" he shouts at her.

"Getting a second opinion," replies Sarah.

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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