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Harry Newton's In Search of The Perfect Investment Technology Investor. Auction Rate Securities. Auction Rate Preferreds.

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8:30 AM EST Tuesday, May 20, 2008: The slogan "Cash is King" means absolute liquidity. It means getting out with what you put into it. Two things.

1. By being in cash or cash equivalents, you avoid the problems in getting out (going to cash) -- like the buyer knowing you're desperate. Think a continuum:

Now start thinking where hedge funds sit on this continuum. Some take months to get out. Mutual funds may take a day or two. ETFs take minutes. Think treasuries of muni bonds. Can you get out with what you put in? Start thinking this way and you start thinking of "What might happen to my sale-ability if something goes awry?" Like what happened with auction rate securities, which went -- from one moment to the next -- from easy to sell, to impossible to sell, yet another victim of "The 2008 Credit Crunch."

2. When the bargains appear, you want to be able to swoop. Since "The 2008 Credit Crunch" is not easing -- it's actually tightening -- bargains are beginning to appear. But the nature of "bargains" is that they take time to appear. Sellers take time to adjust to the fact that their stuff -- think real estate -- is now worth much, much less. When confronted with low-bid offers, they are "insulted." Yet the one rule we know about investing -- especially in real estate -- is that the price you pay now determines your entire ROI -- from buy to ultimate sell. Patience is key. So is not falling in love. That's the big occupational hazard in the real estate -- falling in love with what you want to buy. This hazard peaks when a spouse falls for the house, and hence destroys your ability to bargain or walk away.

The banks, the lenders, the investment bankers sit frozen in fear. They eye my continuum and move their business activity increasingly to the left. They won't lend on leveraged buyouts; they won't lend on commercial real estate; they won't give credit cards to deadbeats (they used to).... And they're repossessing stuff -- like boats, houses, shopping centers. All this is seriously sad for businesspeople who were going about their business as usual -- building apartment buildings, expanding their business to new factories, buying and selling companies. These people face huge penalties for not completing transactions and, worse, face the likelihood of firing their staffs -- now that the business has drastically contracted. But all this is seriously good for those of us with cash.

It's a mixed picture. Cocktail talk among many of my friends: 2008 will be their worst ever year. But some are licking their lips, ready to pounce on the imminent bargains.

The overarching lesson: Don't trust nobody. (Pardon the grammar.) Especially if they work on Wall Street. My friend and reader Jack Krupansky emails me:

I half-agree with something you wrote yesterday about Wall Street:

Wall Street is a product sale machine. It sells you whatever it can sell and make a commission on. It does so without any regard for the long-term riskiness of what it's selling or its appropriateness for you. Hence the obligation to figure what they're selling you is 100% yours. When in doubt -- i.e. when you simply don't understand or have any concerns about the downside -- your job is to say NO.

Please print out the above paragraph. Laminate it and read it every time you speak to your broker or financial adviser.

But, you have a mistake in there that needs to be corrected... delete the language "When in doubt -- i.e. when you simply don't understand or have any concerns about the downside --." And in fact delete the sentence "Hence the obligation to figure what they're selling you is 100% yours."

It is a complete waste of your time to evaluate anything that Wall Street is actively "selling" you. As Nancy Reagan advised with drugs, "Just say No!", and that is what sensible investors are obligated to do with Wall Street. Just say no to anything that Wall Street is ever "selling" to retail investors. The short advice should be that if Wall Street is selling, do not buy. Broker? Financial adviser? If you still have a full-service "broker" or "financial adviser", then that in itself is a matter of concern. Fire them immediately and move your money and investments to a discount broker or several discount brokers. I like Fidelity and happen to use Muriel Siebert as well. Your only "obligation" is to have the discipline to refrain from asking them for "advice."

Sure, your so-called "broker" or "financial adviser" can get you access to so-called "research" and maybe to IPO's, but these days that "research" is complete crap and even discount brokers have better access to IPO's.

The bottom line is that there is no longer any need to "speak" to any "broker" or any "financial adviser." In the old Wall Street parlance. If a broker or financial adviser calls, hang up on him! So, the quoted section from above can be correctly rewritten as:

Wall Street is a product sale machine. It sells you whatever it can sell and make a commission on. It does so without any regard for the long-term riskiness of what it's selling or its appropriateness for you. Your job is to say NO. Do not listen to a word of whatever they have to say. Just say NO! And if they will not give you the opportunity to say NO, simply hang up on them. And if you are too polite [and a wimp] to sternly say NO, simply say "There seems to be a problem with the connection... you are breaking up... [loudly] HELLO?! HELLO?!... I still can't hear you... could you call back later?" and then hang up. Then take advantage of caller ID.

Please print out the above paragraph. Laminate it and read it every time any broker or financial adviser calls and asks to "speak" (i.e., sell) to you. They are not your friends. They are not here to "help" you.

So, now, Harry, please inform us why you are still talking to any full-service broker/financial adviser. Or to flip that over, what argument do you have to offer to convince us that we should get a full-service broker/financial adviser. Besides, we have... you! What other advice do we need? Answer: a good accountant who is always there to tell you the tax consequences of a transaction and to simply ask "Are you SURE you really want to do this?"

Jack, what can I say. You're 100% right. You said it 100% better than I did. I look back at my recent "full-service" broker recommendation -- auction rate securities. And I rue the day I didn't hang up on them, and do a Nancy Reagan. Going forward, my investment "strategy is me. I do the research. I buy what I like for me. I do have one hedge fund, whose philosophy mirrors mine. But the rest is me. And it's working. Remember that First Solar short? It fell $15.24 (or 4.9%) yesterday. And I bet it's going lower. It's way overpriced.

Jack also has a blog

This is SO dumb and so irritating: I remember when we were told that the Iraq War and Iraq post-war reconstruction would be paid for by Iraq's oil. From today's Times in England comes this incredible story:

Iraq could have largest oil reserves in the world
by Sonia Verma in Sharm el-Sheikh

Iraq dramatically increased the official size of its oil reserves yesterday after new data suggested that they could exceed Saudi Arabia’s and be the largest in the world.

The Iraqi Deputy Prime Minister told The Times that new exploration showed that his country has the world’s largest proven oil reserves, with as much as 350 billion barrels. The figure is triple the country’s present proven reserves and exceeds that of Saudi Arabia’s estimated 264 billion barrels of oil. Barham Salih said that the new estimate had been based on recent geological surveys and seismic data compiled by “reputable, international oil companies . . . This is a serious figure from credible sources.”

The Iraqi Government has yet to approve a national oil law that would allow foreign companies to invest. Mr Salih said that the delay was damaging Iraq’s ability to profit from oil output, robbing the country of potentially huge revenues. With oil selling for more than $125 dollars a barrel and demand rising, Mr Salih is frustrated that Iraq still struggles over the establishment of a regulatory framework. “There is a real debate in the Government and among political leaders about the type of oil management structures we should have. I am for liberalising this sector and allowing the private sector to come in to develop these vast resources.”

BP, Exxon Mobil, Chevron, Royal Dutch Shell and Total have been queuing for rights to exploit Iraqi reserves. Mr Salih confirmed that Iraq was negotiating the outlines of two-year deals with some of the companies. He was optimistic that a draft law could be approved in the near future.

“We need to recognise after so many decades of mismanagement of the oil industry that we need to call a spade a spade,” he told a group of delegates at the World Economic Forum in Sharm el-Sheikh. “We can regulate it, but we need private investment to develop Iraq’s production capacities.” He said that Iraq was pumping 2.5 million barrels of oil a day at present, earning about $70 billion (£35.9 billion) in revenue this year.

The price of oil bounced back to record highs yesterday when OPEC refused to increase supplies following Saudi Arabia's promise to the US that it would provide an extra 300,000 barrels a day. In New York, the price of light, sweet crude for June delivery rose from $125.92 to US$126.35. In London, Brent crude for July delivery was up 82 cents at $125.81 per barrel.

More Sunday School (I like this stuff)
Nine-year-old Joey was asked by his mother what he had learned in Sunday School.

"Well, Mom, our teacher told us how God sent Moses behind enemy lines on a rescue mission to lead the Israelites out of Egypt . When He got to the Red Sea , he had his army build a pontoon bridge and all the people walked across safely. Then, he radioed headquarters for reinforcements.

They sent bombers to blow up the bridge and all the Israelites were saved."

"Now, Joey, is that really what your teacher taught you?" his mother asked.

"Well, no, Mom. But, if I told it the way the teacher did, you'd never believe it!"

The preacher's 5 year-old daughter noticed that her father always paused and bowed his head, for a moment, before starting his sermon.

One day, she asked him why.

"Well, Honey," he began, proud that his daughter was so observant of his messages, "I'm asking the Lord to help me preach a good sermon."

"How come He doesn't do it?" she asked.

A rabbi said to a precocious six-year-old boy, "So your mother says your prayers for you each night? That's very commendable.

What does she say?"

The little boy replied, "Thank God he's in bed!"

During the minister's prayer, one Sunday, there was a loud whistle from one of the back pews. Tommy's mother was horrified. She pinched him into silence and, after church, asked, "Tommy, whatever made you do such a thing.

Tommy answered, soberly, "I asked God to teach me to whistle, and He just then did!"

A pastor asked a little boy if he said his prayers every night.

"Yes, sir," the boy replied.

"And, do you always say them in the morning, too?" the pastor asked.

"No sir," the boy replied. "I ain't scared in the daytime."

Little Johnny and his family were having Sunday dinner at his Grandmother's house. Everyone was seated around the table as the food was being served.

When Little Johnny received his plate, he started eating right away.

"Johnny! Please wait until we say our prayer." Said his mother

"I don't have to," The boy replied.

"Of course, you do," his mother insisted. "We say a prayer before eating, at our house"

"That's our house," Johnny explained. "But this is Grandma's house and she knows how to cook!

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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