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8:30 AM Tuesday, May 24, 2005: And you thought there was a real estate bubble in your area. You ain't seen nothing yet. As Exhibit 1, I give you this photograph.

As Exhibit 2, I give you this article from Monday's New York Times:

Salsa Dancers and Stunt Men? Must Be a Miami Condo Project

MIAMI, May 22 - In the last month alone, you could salsa with dancers in fringed hot pants at Aqua, hear a drag queen D.J. at Cynergi or watch stunt men ricochet off a trampoline at Soleil. Nightclubs? No. Carnival acts? Not quite.

These were launch parties for condominium projects, one of the stranger forms of nightlife in a city obsessed with real estate. Alcohol and music were abundant, but so were sales agents and brochures with statements like, "It is the impeccable aesthetic of textures and calming shades - limestone and blue marble - that further distinguish these voluminous spaces."

Deep-pocketed developers, forced to be ever more creative in the pursuit of buyers for condos still years from being built, pay for these lavish affairs - another take on the "froth" in the housing market that Alan Greenspan, the Federal Reserve chairman, described last week. Though the parties emulate the club scene, most take place in hastily erected sales centers or parking lots near the future construction site. Guests encounter model kitchens and scan price lists while sampling mojitos and tuna tartare.

"Everyone needs to one-up each other more and more with these things," said Jorge Luis Garcia, a real estate agent attending a party for Vitri, an unbuilt project in South Beach where prices start above $600,000. "The food's got to be better, the lighting's got to be better, the D.J.'s got to be really good. The new norm is the quarter-million-dollar party."

No expense is spared because the stakes are high: about 70,000 condo units are planned, under construction or newly finished in Miami proper, home to fewer than 400,000 people. Builders need early deposits to get construction loans, so they work hard to entice the buyers they covet - image-conscious people, many from Latin America and Europe, with money to burn on a second home, a speculative investment or a status symbol.

The bait includes small initial down payments, slick marketing - and parties. Usually held just before a project begins selling units, the events are meant to create buzz among brokers, who make up the bulk of invitees and bring clients and hip, attractive friends. Live with us, the parties say, and ooze wealth, sex, fitness and mystery.

Jon Graney, who owns two condos in South Beach and is looking to buy more, said launch parties were beginning to rival clubs.

"I mean, look at the women here," Mr. Graney said at the party for Vitri, a smallish project with about 70 units next to a busy overpass on Biscayne Bay. He gazed around the sales office courtyard. "Look at all these pretty women."

He added, however, that he would probably not buy at Vitri because the building was too low. "If I spend six hundred grand," he said, "I want to go high."

While the Vitri party whispered "gallery opening," with waiters padding about and artwork on display, the one for Paramount Bay, a much larger project in Miami, screamed "movie premiere." Guests walked a red carpet, mingled among models at martini bars made of ice and watched Star Jones of "The View" interview the architect, sales director and other luminaries of the project. The models and Ms. Jones were paid to attend.

To stir up fresh interest in a project called Aqua, Craig Robins, the developer, held a party so sprawling that arriving guests got maps with their promotional packets. Aqua's 105 condo units sold out this month, but 46 town homes, which start at $2.65 million, have been a tougher sell.

The theme was "A Day in the Life of Aqua." Dancers in fringed shorts coaxed some guests to salsa to a 10-piece band while other guests hovered around giant pans of paella and ropa vieja. A lounge singer belted out "Respect" in a model living room while chefs whipped up crepes in the model kitchen. Near a newly planted mango grove, guests drank mango caipirinhas and gazed at the Intracoastal Waterway.

Marian Davis of New York City gushed as she showed other party guests the view from a penthouse unit she bought with her husband. "I think of this as Park Avenue or the Champs-Élysées," Ms. Davis said, "except you've got water in the middle of it."

Some guests were overheard sounding less impressed: "A million eight? You've got to be kidding me." "Marble countertops are kind of over."

Across the bay in Miami, where developers are snatching up land in scruffy neighborhoods being reinvented as arts districts, the parties have a funkier vibe. Cynergi held a launch party in April with a drag queen D.J., macaroni and cheese, inflatable lounge chairs and a blank canvas for guests to paint on.

Soleil, a "sports-inspired" project in Wynwood, a gritty neighborhood just north of downtown, gave a party at its sales center last week with trampoline artists, karate demonstrations, masseuses, an aura reader, an oxygen bar and sales agents in tracksuits, with towels slung on their shoulders. Rita Gambardella, a real estate agent, brought her sister, Paula, and their friend Debra Carlson, visitors from Seattle who could not stop snapping photos. Both said they were thinking of buying at Soleil, a 43-story building with prices starting near $400,000.

"I would come here probably four times a year and rent it out the rest of the year," said Ms. Gambardella, in a red dress and cowboy hat.

"Shoot, I'd retire here," Ms. Carlson chimed in.

Ricardo Aue, a financial adviser who said he has bought and sold about 20 condos and houses here over the last three years, was crunching numbers as he watched the trampoline act. "I bet you 70 percent of the people buying here are investors," Mr. Aue said, "so 70 percent of the units will be for sale again by the time this thing opens."

"That's too much supply for this kind of building, such a high-end thing," he said of the overall market.

Still, Mr. Aue said he did not regret attending the Soleil party, one of many that he checks out these days. "Maybe I meet someone who tells me about a project that's coming up that I like better," he said, "or a new mortgage guy."

Or maybe he just soaks up another evening of real estate mania. As the light faded and dessert trays were passed, two men bounded through the crowd in antigravity boots, an update on pogo sticks. Guests drifted toward the valet parking line, cans of Red Bull (a sponsor) in hand, nose tubes from the oxygen bar draped around their necks.

The refrain of the track-suited sales agents echoed: "Sales start June 6."

As Exhibit 3, I bring the latest issue of Fortune Magazine:

Its long ten-page cover story begins "They snap up real estate, flip it, then chase the next hot market. They’re the new day traders — and they’re dancing on the edge of a volcano." Before you read the entire, frenzied article -- click here -- remember two facts: First, the author, Grainger David lives in a rented New York City apartment. Second, he owns no real estate. Nothing. He personally thinks the bubble is a BUBBLE. And he believed in his bubble theory before he researched and wrote the story.

CallWave now officially sucks. K7 is better: For years, CallWave gave me a free fax line. It grabbed my faxes, converted them to a PDF and emailed them to me. Much easier for me, especially when traveling. Then CallWave charged $3.95 a month. I went along. Recently, they raised the price to $7.95, which is too high. Bye, bye CallWave (CALL). You have a new competitor. It's called K7. Everyone can now sign up for a free fax number -- Click here. One final point: Send yourself a fax. When it comes in, fish it out of your junk/spam email box and tell your email software that K7 is an OK sender. By the way, K7 is perfect for overseas readers who want a cheap (i.e. free) U.S. fax number.

I have a dear friend at CallWave, David Hofstatter, who's president and CEO. I have emailed and called him about the new ridiculous higher charges. I even offered to pay him $3.95 a month for the fax line (without the voice stuff he throws). He hasn't responded. You'd think he'd be more responsive, given his company's recent miserable share performance:

Why are executives SO stupid?

Why Wall Street often sucks:

Item 1: Headline: Goldman Leaves Buyers With Losses in Winning No. 1 in U.S. IPOs

May 23 (Bloomberg) -- Goldman Sachs Group Inc., the world's most profitable securities firm, is the No. 1 underwriter of U.S. initial public offerings at the expense of investors who have lost money in eight of the firm's ten IPOs this year.

Shares of Goldman-led IPOs, including Lazard Ltd.'s $855 million sale, fell an average 10.8 percent in 2005. By contrast, initial offerings managed by Morgan Stanley, Goldman's closest competitor, rose almost 4 percent. Lazard, the investment bank headed by Bruce Wasserstein, is down 15 percent since it started trading on May 4.

New York-based Goldman, which gets almost 25 percent of its investment banking revenue from share offerings, earned about $120 million from arranging U.S. IPOs so far this year, data compiled by Bloomberg show. The buyers of these stocks, meantime, are nursing losses of as much as 30 percent.

"Goldman has turned its back on the `buy side' and chosen to do deals in a way that benefits their investment-banking clients,'' said Ben Holmes, an IPO specialist at Boulder, Colorado-based Protege Funds LLC.

Thomas Tuft, 58, chairman of Goldman's equity capital markets group, and David Solomon, 43, who oversees equity underwriting, declined to comment. Goldman, led by 59-year-old Chief Executive Officer Henry Paulson, ranked as the top arranger of U.S. IPOs in three of the past six years.

"We would not have had the success in our equities business without taking into consideration the interests of both our buy side clients and issuing clients,'' said Goldman spokesman Peter Rose in an interview.

These clients include billionaire Edgar Bronfman, whose Warner Music Group Corp. went public at $17 on May 11. While Warner Music has since dropped 5.3 percent, Goldman and New York- based Morgan Stanley shared underwriting fees of $26.3 million with 13 other securities firms.

About 53 percent of all of this year's IPOs in the U.S. -- 45 of 85 -- are trading below their offering price, Bloomberg data show. That compares with 42 percent in the same period last year, when companies raised $10.2 billion. This year, U.S. IPOs have attracted $12.9 billion.

The increase in underperforming IPOs occurred as the Standard & Poor's 500 Index fell 1.9 percent since the end of December, after rising 26 percent in 2003 and 9 percent in 2004.

"When there's a market downturn, you get lots of deals priced below the price range,'' said Jay Ritter, a finance professor at the University of Florida in Gainesville, who has analyzed the performance of IPOs for the past 14 years.

Stock sales managed by Goldman rewarded investors in the past. Goldman offerings rose 41 percent on average in their first three years of trading, according to data tracked by Ritter from 1990 to 2003. The returns exceeded IPOs managed by Morgan Stanley, Merrill Lynch & Co. and Credit Suisse First Boston. All the firms are based in New York.

This year, Goldman is responsible for marketing the worst- performing group of IPOs in the U.S. among the five busiest underwriters, according to Bloomberg data.

Goldman's best-performing U.S. IPOs this year are Prestige Brands Holdings Inc., the Irvington, New York-based maker of consumer products such as Comet soap and Murine eye drops, up 5.8 percent since Feb. 10; and American Reprographics Co., a Glendale, California-based software maker, up 13.9 percent since Feb. 4.

The worst-performing Goldman IPO has been Tampa, Florida- based Syniverse Holdings Inc., which sells technology to wireless phone companies. The stock is down 30.6 percent since the Feb. 10 IPO.

"It's an unsettled time for IPOs,'' said Elizabeth Newberry, managing director at New York-based Carret & Co. that manages about $1 billion and hasn't bought shares of an IPO this year. ``I would think twice before I would become an issuer.''

... Goldman was the most profitable of the world's biggest securities firms in the first quarter, with net income of $1.51 billion in the first fiscal quarter, compared with $1.47 billion at Morgan Stanley and $1.21 billion at Merrill Lynch. ...

Following is a chart of Goldman's U.S. IPOs in 2005 and how they have fared:

Item 2: Superfund: Remember my unkind words on that piece of dog doo-doo. Here's an email I received this morning from reader Dieter Tegrovsky.

Dear Harry,
Let me come in from the cold…. I enjoy reading your daily column for quite some time, it always gives me interesting things to think over… for which I would like to thank you… please find below an article from the Austrian quality paper “Die Presse” of today, providing some interesting information about the performance of Mr. Baha´s Superfunds… as I assume that your command of the German language apart from heavy discussions with Mercedes might not the most fluent one, let me give you some explanations:

in short, it is stating that following the degrading of GM and Ford bonds, the so-called Superfunds lost feathers heavily – fund C from beginning of 2005 until May 17 a total of 28.6 %, fund B 23.2 %.... in April alone Superfund Global Consolidated Trust lost 15.93 %, Superfund C Eur Sicav lost 22.16 %, compared to CSFB Tremont Hedge Fund Index which lost in April only 1.04 %....

Mr. Baha was not available to comment on the bad performance of his funds….

Herbe Verluste für Superfund
(Die Presse) 24.05.2005
Von GM und Ford offenbar am falschen Fuß erwischt.
Wien (dom/bloomberg). Als Folge der Herabstufung der großen US-Autofirmen General Motors und Ford mussten die Hedge-Fonds der heimischen Superfund-Gruppe (ehemals Quadriga) kräftig Federn lassen. Der Quadriga Superfund C verlor von Anfang 2005 bis zum 17. Mai laut Superfund-Website 28,6 Prozent, der Superfund B 23,2 Prozent.

Die Fonds der Superfund-Gruppe sind sogenannte Trendfolger (CTAs). Diese gelten nach Experteneinschätzung als riskanteste Strategie in der Welt der Hedge-Fonds, wurden aber in Österreich auch von vielen Privatpersonen gekauft. In guten Jahren schneiden derartige Managed Futures oft deutlich besser ab als Konkurrenzprodukte. Vor allem, wenn es auf den Finanz- oder Rohstoffmärkten keine ersichtlichen Trends gibt oder es zu plötzlichen Trendbrüchen kommt, kommt es bei den Trendfolgern zu Rückschlägen (Drawdowns).

Schon 2004 war kein gutes Jahr für die Trendfolger, heuer ging es weiter bergab. Die Entwicklung des Ölpreises hat viele Fondsmanager ebenso am falschen Fuß erwischt wie zuletzt die Reduktion der Bonitätsbewertung der US-Autokonzerne GM und Ford, deren Anleihen von der Ratingagentur S & P auf Junk-(Schrott)-Niveau herabgestuft worden war.

Allein im April verlor der Superfund Global Consolidated Trust 15,93 Prozent, der Superfund C Eur Sicav 22,16 Prozent. Zum Vergleich: Der CSFB Tremont Hedge Fund Index verlor im April nur 1,04 Prozent.

Christian Baha, Gründer und Chef der Superfund-Gruppe, war für eine Stellungnahme zur schlechten Performance der Fonds nicht zu erreichen. Im aktuellen Newsletter auf der Superfund-Website stimmt er die Anleger aber schon darauf ein. Da heißt es wörtlich: "Futures Fonds ermöglichen hohe zweistellige Renditen - dafür muss man auch zeitweise Verluste in Kauf nehmen." Die längste Drawdown-Phase bei Futures Fonds habe ganze 28 Monate angedauert.

How to be an equity angel Part 2: Yesterday's quiz: 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

Most readers were skeptical of the revenue projections. And so they should be. There are very few companies that can grow this fast. Even if they could, they'd need massive repeated injections of cash. Reader Jay Liebowitz asks, "Why does the gross margin fall to 50% in a market with no competition and easy technology? It should be in the 70% range." He's right.

He also asks "How do you go from a couple of prototypes to a factory that produces that much that fast?" He also asks questions about customers and how many have tried the prototypes? What did they say about them?

All of us are venture capitalists. People come to us with startups they want funded. Saying Yes is easy. Saying No is less easy, but do-able. Checking the idea out is not easy or quick. Before we put money into this investment we'd want to check out the management, the customers, the technology, the distribution methods, the marketing, the finance, etc. Weeks of work. Time you could be playing tennis.

So, this one? Is it worth the time? My quick take: Projections are way too optimistic. Money to be raised is too little ($1.5 million). Go play tennis.

Getting into Heaven:

Henry was a hard working man who provided for his family his whole life.
He suddenly found himself at the gates of Heaven, standing before the Angel of the Lord.
Henry asked the angel, "What must I do to enter such a beautiful place?"
The angel replied, "You must spell love."
Henry replied, " Well that's easy... L-O-V-E".
The angel said, "Very good Henry. You may enter. But before you do, please guard the gate so that I can run a quick errand."
Henry agreed. After an hour Henry's wife appeared at the gates. She had died having missed Henry so much.
She said, "Oh Henry I've missed you so. What must I do to join you in such a beautiful place?"
Henry replied, " Hello honey. To enter, all you have to do is spell Czechoslovakia."

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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