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Newton's In Search Of The Perfect Investment. Technology Investor. Previous Columns
8:30 AM Monday, May 23, 2005: My life's goal is to beat Skip Hartman at tennis. Yesterday he beat me 6-2, 6-4. I take lessons. Every day we play I get better. But Skip ratchets his game up. I've been losing to Skip for 20 years. Everyone should have an irrelevant goal, with an important byproduct -- lots of exercise.

We sold another property: This one gave us a 26% IRR. I asked Jeff Lew, the sub-syndicator, "What now?" Jeff answered:

Actually what happened was typical of the category. Taurus identified an opportunity that eventually was discovered by the market. At the time single tenant properties traded at a higher cap rate. Putting a bunch of those together to diversify out the risk was a smart idea. Others caught on and the good pricing went away.

It's like you said the other day in your column. Buy a house from someone who needs to sell, a divorcee, a family moving etc. We have a good roster of sponsors that are smart and uncover opportunities in the marketplace. Be sure to diversify, and bet on smart people, ones with a history of success. The real estate market is inefficient and not perfect. Smart sponsors find opportunity. That's my plan.

Makes sense to me.

Invest like Harvard and Yale: Allocation is the key to decent portfolio performance. We know that. We also know if you go to a stockbroker you'll be given an "allocation" that's ultra-narrow -- stocks, bonds and cash. On May 11 (click here), I wrote how Yale earned 19.1% on its endowment in 2004, bringing its 10-year return to 16.8% a year, net of fees. Now comes word of Harvard's performance -- 15.9% average over the last decade, and 21.1% last year.

The "BIG Things" you learn from Harvard and Yale:
1. Their sharply decreasing reliance on U.S. equities -- i.e. the stuff BubbleVision (CNBC) fills its airways with.
2. Their broad allocation to many asset classes., many of which sadly aren't easily available to you and I.
3. The extreme skills needed to manage money. Harvard paid two of its bond managers $25 million last year. And -- dig this -- they're leaving Harvard to (hopefully) earn more money in their own hedge fund.
4. Harvard relies heavily on short-term trading.

From the NY Times, May 22, 2005. Click here.
Asset Class
June 2004
Current Target
Domestic Equity
Fixed Income
Absolute Return*
Foreign Equity
Private Equity
Real Assets**
* Absolute return investments "seek to generate high long-term real returns by exploiting market inefficiencies. Approximately half of the portfolio is dedicated to event-driven strategies, which rely on a very specific corporate event, such as a merger, spin-off or bankruptcy restructuring, to achieve a target price. The other half of the portfolio contains value-driven strategies, which involve hedged positions in assets or securities that diverge from underlying economic value. ... Unlike traditional marketable securities, absolute return investments provide returns largely independent of overall market moves. Over the past ten years, the portfolio exceeded expectations, returning 12.2% per cent per year with essentially no correlation to domestic stock and bond markets.

** Yale defines real assets as real estate, oil and gas, and timberland. Yale says these "share common characteristics: sensitivity to inflationary forces, high and visible current cash flow and opportunity to exploit inefficiencies."

See my May 11 column for more on Yale. Click here.

How to be an equity angel. Here's your quiz today. You're an angel. You invest in start-ups. You receive one with a new idea. No competitors. Easy technology. Some patent coverage. A couple of prototypes built. The following estimated financials. Would you do it? Send me an email with your reactions.

Summary Financials (cash)
FY 2006
FY 2007
Gross Revenues
Cost of Goods Sold
Net Revenues
Operating Expenses
Net Cash (Operations)
Gross Margin
Net Margin
Revenue Growth-- year to year

The Hitchhiker's Guide to the Changing Galaxy: UBS analyst Pip Coburn recently wrote "Which technologies will be winners and what will be losers?
Winners: Flat panels -- Texas Instruments (TXN) and Corning (GLW). Business Intelligence -- Cognose (COGN) and (Hyperion Solutions) HYSL. Mobile email -- Research in Motion (RIMM). Satellite radio -- XM Satellite Radio (XMSR).
Losers: fiber to the premise, WiMax, RFID, the digital home.
I'm dubious I'd go anywhere near any of his picks. But when you're an analyst covering a field, you've got to make some picks. You can't do what Yale and Harvard do -- go elsewhere.

Unreliable Mercedes: We bought a new Mercedes E500 wagon a year ago. Our experience has not been good. The electronics give far too much trouble. The low profile tires are a disaster in New York's potholey streets. Our troubles are reflected in Daimler-Chrysler's financial results for its Mercedes division. Good news: they finally fixed their cupholders in the 2005 model.

Words of wisdom:
"Nothing is more difficult than to introduce a new order. Because the innovator has for enemies all those who have done well under the old conditions and lukewarm defenders in those who may do well under the new." -- Noccolo Machiavelli, 1532AD.

Guaranteed folk remedies: On Friday I wrote about three. I've fixed the ginger powder recipe:

1. Arthritis: Soak a pound of golden raisins in gin. When the gin is absorbed into the raisins, put the raisins in a jar. Eat nine raisins each day.
2. Travel sickness:
+ Bandaid a copper penny to your bellybutton.
+ When feeling queasy, inhale deep whiffs of a black and white newspaper.
+ Drink 1/2 teaspoon of ginger powder dissolved in eight ounces of warm water, 20 minutes before traveling.
3. Allergies: Chew honeycomb. Swallow the honey. Chew on the comb and spit it out. The honeycomb must come from your part of the country. Buy it at your local farmers' market.

Here are two more -- these work also:
4. Leg Cramps. Use this simple technique called "acupinch" and the muscle cramp will go away almost instantly. The second you get a cramp, use your thumb and your index finger and inch your philtrum -- the skin between your nose and upper lip. Keep pinching until the pain and cramp disappear.
5. Sty. As soon as you feel a sty coming on, rub it at least three times with a gold ring. It may sound like a superstition, but it works.

For more, the book is Bottom Line's Healing Remedies by Joan and Lydia Wilen. Click here.

The Dentist and the Golf Game
A man and his wife walk into a dentist's office. The man says to the dentist, "Doctor, I'm in a terribly big hurry! I have two buddies sitting out in my car waiting for us to go play golf. So forget about the anesthetic and just pull the tooth and be done with it--I don't have time to wait for the anesthetic to work!"

The dentist thinks to himself, "My goodness--this sure is a brave man, asking me to pull a tooth without any anesthetic."

The dentist asks him, "Which tooth is it, sir?"

The man turns to his wife, "Open your mouth, Honey, and show the nice doctor which tooth hurts."

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. That money will help pay Claire's law school tuition. Read more about Google AdSense, click here and here.
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