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8.:30 AM EST Friday, May 2, 2008: Good news. The world has changed, at least according to the press, which, like me, suffers for something brilliant to write about each day. A week ago, it was all doom and gloom. Now it's all happy days are here again. Has anything fundamentally changed? No. Has investor sentiment changed? Your guess is as good as mine. The traditional measure is the VIX. Lately it's dropped dramatically:

What does this mean? According to my favorite and most trusted broker Todd, who will voice a learned opinion on most anything,

"When the VIX is as low it is now, complacency among investors is high. Fear is low. And people are stupid. Think about it. Less than a month ago, Bear Stearns was on the brink. Everyone was fearing the Great Depression. Everyone was seeking safety in treasurys, gold and silver. Now, a few weeks later everyone is piling out of treasurys -- they don't want quality -- they're back into gambling. A financial disaster of the sub-prime etc. size cannot be undone in under a month."

Translated, he's in my camp -- fearful. Cash remains king. When in doubt, stay out.

Yesterday was up bigtime. It felt good. Except that gold (GLD), silver (SLV), and First Solar fell. But traditional "hot" stocks, like Apple and MasterCard rose strongly. I look upon this strategy, which when combined with my commodities, emerging markets (via Vanguard) and Australian mining exposure, as my feeble attempt at "hedging." I haven't applied for a patent on this. And I doubt they'd give me one.

Meantime, the New York Times, is running positive stories. This has two objectives: It proves to the world that it's not doom and gloom New York left-wing, Commie pinko liberal. (My friends out west believe this.) And it puts up a strong competitive front to Rupert Murdoch's Wall Street Journal, which is increasingly reflecting Rupert's own right-wing, low-taxes, optimistic philosophy. With all this as background, read today's New York Times piece:

Economic Clouds? Wall Street Sees Signs of Sunshine
Main Street may be struggling, but Wall Street is on a bit of a roll.

Despite a drumbeat of bad economic news, the stock market is up — almost 11 percent in the last few weeks. Junk bonds, those risky corporate I.O.U.’s, are rallying. The value of financial shares, bank loans, tricky credit derivatives — up, up, up.

Many on Wall Street, the epicenter of the credit mess, seem to think that the worst is over. For the first time in months, analysts and executives sound upbeat again. Many of them see a broad, sustained recovery in both the economy and the financial markets coming in the second half of this year, a prediction some market strategists call hopeful at best.

For now, policy makers are echoing the mood on Wall Street. Treasury Secretary Henry M. Paulson Jr. said in an interview with Bloomberg Television on Thursday that “we are closer to the end of this problem than we are to the beginning.”

A report from the Bank of England, meantime, concluded that mortgage securities, which have been at the heart of the financial troubles, probably have fallen too far. The central bank said prices of such securities should “improve gradually in the coming months.”

Financial stocks and the broader market surged on Thursday as the dollar strengthened and oil prices fell for the third day in a row. The Standard & Poor’s 500-stock index closed up 1.7 percent, to 1,409.34 points; the Dow Jones industrial average notched a 189.87-point gain, to 13,010; and the Nasdaq composite jumped 2.8 percent. Another day or two like that, and those market benchmarks will be in the black for the year.

It is a remarkable reversal in attitudes from just a few months ago, when the broader economy seemed relatively healthy but Wall Street was traumatized by billions of dollars in mortgage-related losses. Now, bankers and investors appear ready to look past the crisis to more profitable times, while consumers find themselves in a more precarious position as the job market weakens and banks make it harder to borrow money.

It is, of course, not uncommon for Wall Street to run ahead of the broader economy. Investors, after all, make money by anticipating the future. The job market, by contrast, improves more slowly than other aspects of the economy.

But specialists say the two sides will eventually converge. Either the markets will give up their recent gains or, if the optimists are right, the broader economy will show greater strength as tax rebate checks and lower interest rates stimulate the economy.

There have been false dawns before. Last spring, after several mortgage companies collapsed, Mr. Paulson and the chairman of the Federal Reserve, Ben S. Bernanke, said the problems appeared to be “contained.” In early October, just two months after credit markets froze up, the stock market climbed to an all-time high.

The optimists believe it is different this time. The catalyst for the change, they say, was the Fed-arranged deal that sold a troubled investment bank, Bear Stearns, to JPMorgan Chase in mid-March. The central bank further restored order in the markets by lending directly to investment banks, assuring that big securities firms could not be undone by a crisis of confidence.

In the last month, the cost of insuring against the failure of banks and other companies has fallen sharply. Pressures on financial firms also appear to have eased somewhat because banks have tended to borrow less from the Fed in recent weeks than they did in March and early April. The cost of interbank borrowing has also fallen.

“There has been a huge change of sentiment in all of the markets, a lot of the fear has been gone,” said William Knapp, investment strategist for MainStay Investments, a division of New York Life.

Still, skeptics say the optimism on Wall Street is premature. These people argue that even if the Fed has defused the immediate liquidity crisis facing the financial system, much pain lies ahead in the housing market and the broader economy.

“We should be very grateful that things appear to have improved in the financial sector and that significantly reduces the risk of a financial meltdown,” said Bernard Connolly, chief global strategist for Banque AIG in London. “But it doesn’t mean that there is not going to be a deeper and more protracted U.S. slowdown than people had thought.”

Foreclosures are climbing at a strong clip and the decline in home prices has picked up speed in recent months. Rod Dubitsky, an analyst at Credit Suisse, estimates that falling home prices, tighter lending standards and job losses could force an additional 2.8 million mortgages into foreclosure in 2008 and 2009. That would be on top of the 1.2 million loans that were in foreclosure in January.

One sign that the mortgage market remains unsettled is that the national average for a 30-year fixed mortgage has climbed modestly, to 6.06 percent on Thursday, up from 5.85 percent at the end of March, according to Freddie Mac, the government-sponsored mortgage lender.

The job market is also weakening. The unemployment rate, which measures the number of people without jobs who are actively looking for work, remains low at 5.1 percent, but the percentage of working-age Americans without a job has risen significantly in recent months. The Labor Department will release the employment report for April on Friday, and a big reduction in jobs and increase in unemployment could put a damper on Wall Street’s enthusiasm.

In addition to the employment picture, the market closely follows corporate earnings. Profits have fallen every quarter since the third quarter of last year, largely as a result of write-offs at financial firms and losses at homebuilders and other firms that rely on discretionary consumer spending.

“The nonfinancial sectors are doing pretty well,” said Robert C. Doll, vice chairman at BlackRock, the investment firm. He added: “I am not making the case that the consumer and the economy is not weak, but I think it’s a lot stronger than the bears are saying.”

Analysts expect a sharp upturn in profits in the second half, in part because the earnings will be compared with weak results from 2007 but also because exports are surging. The $117 billion in federal tax rebates that will start going out this month should also help bolster profits.

But some specialists say that the market’s expectations for profits are too lofty. They assert that slowing consumer spending will offset the gains corporate America is reaping from rising exports, which may also suffer because economies in Europe and Asia are starting to slacken.

Analysts have been lowering their profit forecasts in recent weeks. At the start of April, for instance, second-quarter profits were expected to fall 2 percent; now analysts are estimating earnings will fall 6 percent, according to Thomson Reuters.

“I don’t think it’s a definite by any stretch of the imagination that we are in for a recovery in the second half,” said K. Daniel Libby, a senior portfolio manager at Sands Brothers Select Access Management Fund. “There are still plenty of downside risks to the economy.”

Some specialists say the market is bouncing between despondency and exuberance, as it often does when the future is cloudy. The S.& P. index fell about 10 percent in the first three months of the year, its worst quarterly performance in more than five years. In April, however, the market jumped 4.8 percent, its best month in four years.

“Sentiment had gotten so pessimistic that it was the perfect opportunity for the rally that we have had,” said Liz Ann Sonders, chief investment strategist for Charles Schwab. “Now, you have seen a pretty quick reversal. That’s natural for the market.” Ms. Sonders added, “I think in general, we ought to hold off on either extreme.”

My friend's mold disaster: He'd walk in the door and start sneezing. His wife had trouble breathing. The kids acted cranky. But nobody knew the problem until one night the pipe finally broke and water gushed out. Then they discovered the mold. It was everywhere in their neat San Diego, California house. There'd been a slow leak. The mold had been growing for six months. They'd been living with it. This stuff is seriously toxic. They're now out of their house. It will take months to rebuild the house. Their lives are a mess. The major lesson: When bad stuff happens, get yourself a public adjuster. These guys apparently are good. Don't try to handle disasters on your own.

What does it take to give up sex? Shortly before Valentine's Day, a study was released claiming that 47% of men in Britain would give up sex in return for a big-screen plasma television (in particular a Pioneer PDP-5080HD). As with all matters relating to technology, numbers are key: precisely how long were these men prepared to go without sex? And how large a screen? (Answers: six months, fifty inches.) The survey was conducted by an electronics retailer, so it's biased -- probably useless -- but fun.

The idiocy that was the housing mess. In the old days (like last year), people would sell homes or take out mortgages on homes that did not belong to them. Like the wife and her boyfriend who sold her husband’s house while he was in Iraq. He didn't find out until he came home. Lenders at the closing often did not ask for pciture ID, or if they did, the borrower or seller would say they left the wallet at home and, since everyone was there, the closing would take place anyway. A friend whose wife is a claims counsel for a title insurance company, sent me this excerpt from a deposition:

Q: During this meeting, did you ask anyone to provide you with any kind of picture ID?

A. No.

Q. Why not?

A: It wasn't our practice.

Q. Why is that not your practice?

A. Just like why don't I ask for them to bring a monkey with them to the office. It's not part of our practice.

Q. With all due respect, I think providing a picture ID is probably a little bit more appropriate than asking someone to bring a monkey if you're issuing a loan to them.

Lyme Disease is truly awful: If not treated in time, it can be permanently debilitating. Words can't describe the permanent agony some of my friends live with. As the summer approaches and as the deer tick spreads wider and wider throughout the U.S., I implore all of you to be ultra-careful outside. Stay away from tall grass. Stay covered. Check yourself (and have your spouse) check you carefully for ticks. Do it carefully. The smallest ticks are the most dangerous. If you suspect you've been bitten, get yourself (and hopefully) the tick to a doctor fast. This stuff is really serious. The latest issue of Psychology Today magazine has a piece titled, "The Great Imitator. Lyme disease can masquerade as a host of psychiatric ills, confounding doctors and driving patients to question their very sanity." My friend, who's had Lyme Disease for years, says "This is one of the best articles I've ever read regarding Lyme." Her own progress?

Still fighting it here myself. The Lyme bacteria have gone "cystic" on me, collecting in my abdominal area. Fortunately the brain issues and nervous system issues have been reduced to a dull hum. I'm on a new rigorous round of antibiotics in an attempt to reach them and kill them...

The article is excerpted from a forthcoming St. Martin's Press book, "Cure Unknown: Inside the Lyme Epidemic" by Pamela Weintraub. Pamela has given permission for everyone to download the article (in .pdf format) from here or from this site. This is a huge 8 meg file. Don't despair.

Yes! Go Amazon. Amazon.com -- God bless it -- has filed a lawsuit challenging New York State’s new law forcing online retailers to collect sales tax on shipments to state residents. If New York gets away with this, every New Yorker Amazon customer (including me) will be pissed. But we'll all find a new friend in New Jersey, Connecticut or Massachusetts and New York State won't be any richer. From today's New York Times:

On Friday, Amazon filed a complaint in State Supreme Court in Manhattan objecting to the law, which was approved as part of the $122 billion state budget that Gov. David A. Paterson signed last week. The law is expected to raise about $50 million.

The issue is not whether people (that's you and me) should pay tax when they buy goods from out-of-state sellers like Amazon. For decades, the state has required them to pay sales or use tax.

The question is whether the vendors must collect that tax on behalf of the state. Generally, only those companies that have a physical presence — like an office or store — in the state where the purchase is made are required to collect the tax.

The new law is based on a novel definition of what constitutes a presence in the state: It includes any Web site based in the state that earns a referral fee for sending customers to an online retailer. Amazon has hundreds of thousands of affiliates — from big publishers to tiny blogs — that feature links to its products. The state law says that thousands of those have given an address in New York State, although the addresses have not been verified.

The law says that if even one of those affiliates is in New York State, Amazon must collect sales tax on everything sold in the state, even if it is not sold through the affiliate. This is an extension of an existing rule that companies employing independent agents or representatives to solicit business must collect taxes for the state.

Amazon’s suit challenges the constitutionality of this interpretation and seeks a declaratory judgment that it is invalid.

The company’s complaint argues that the statute is “overly broad and vague.” It is impossible, Amazon wrote, for it to determine which of its affiliates are actually in New York State.

Amazon says that its affiliates are not agents, but simply sites on which it places advertising. The commissions it pays the sites are simply one method of paying for those ads, it argues.

And it further claims that the new rules violate the equal-protection clause of the Constitution because they specifically took aim at Amazon. “It was carefully crafted to increase state tax revenues by forcing Amazon to collect sales and use taxes,” the complaint says, noting that “state officials have described the statute as the ‘Amazon Tax.’ ”

Tom Bergin, a spokesman for the New York State Department of Taxation, said that the department would not comment on the suit until it filed a formal reply with the court. The state’s defense will be coordinated by the attorney general’s office.

$50 is $50
Morris and his wife Esther went to the state fair every year, and every year Morris would say, 'Esther,I'd like to ride in that helicopter.'

Esther always replied, 'I know Morris, but that helicopter ride is fifty dollars, and fifty dollars is fifty dollars'

One year Esther and Morris went to the fair, and Morris said, 'Esther, I'm 85 years old. If I don't ride that helicopter, I might never get another chance.'

To this, Esther replied, 'Morris that helicopter ride is fifty dollars, and fifty dollars is fifty dollars.'

The pilot overheard the couple and said, 'Folks I'll make you a deal. I'll take the both of you for a ride. If you can stay quiet for the entire ride and not say a word, I won't charge you! But if you say one word, it's fifty dollars.'

Morris and Esther agreed and up they went. The pilot did all kinds of fancy maneuvers, but not a word was heard. He did his daredevil tricks over and over again, but still not a word.

When they landed, the pilot turned to Morris and said, 'By golly, I did everything I could to get you to yell out, but you didn't. I'm impressed!'

Morris replied, 'Well, to tell you the truth, I almost said something when Esther fell out. But you know, fifty dollars is fifty dollars!'

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 on this site. Thus I cannot endorse, though some look 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 Michael's business school tuition. Read more about Google AdSense, click here and here.
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