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8:30 AM EST Wednesday, May 24, 2006: The initial fear was inflation. Then came the affect of higher interest rates on arresting the economy (and thus the stockmarket). The latest fear is that the Fed will seriously mess up the handling of the economy, driving it into recession. The fear is real, palpable and translates into selling into upkicks. This has seriously bad implications for the stockmarket for the next few months. Check out this short-term behavior. As the market tries to bounce back, sellers rush in and dump stock.







Am I saying Sell? I can't predict the future. No one can. But it definitely looks ugly out there. It's too easy to make a case for ugliness -- new, untested Fed chairman, higher interest rates and higher gas prices braking key economy sectors, huge deficits, a declining dollar, government printing money. The summer is not going to be easy.

The major good news is that I've kept us all out of big disasters, such as Microsoft, Intel and Dell. The bad news is that I didn't recommend aggressively selling them all short. Hopefully some of you did, anyway.

In short, lighten up.

InSite Vision is liked: ThinkEquity Partners wrote a nice report with a $4 target. This one is working.



For ThinkEquity Partners' report, click here.

One wonders about Morgan Stanley. My personal experiences with them have been bad. And I wouldn't recommend the firm to my worst enemy. Now comes the news (from the Wall Street Journal):

The big Wall Street firm was recently fined $15 million by securities regulators led by the Securities and Exchange Commission, saying the firm made "numerous misstatements" to stock cops regarding its document-production capabilities from 2000 to 2005.

The firm claimed it hadn't retained emails related to numerous big investigations when in fact it had. The SEC alleges the firm destroyed other emails it was required to keep. During settlement negotiations, regulators discussed but opted not to provide some recourse for small investors affected by the document problems, according to people familiar with the discussions. The firm settled without admitting or denying guilt.

This decision enraged members of the plaintiff bar, who represent small investors, some of whom say that if securities regulators won't provide them access to the emails they will simply file new arbitration cases against the firm. For instance, Florida lawyer Darren Blum says he plans to file as many as 30 new cases, asking for damages related to his clients' original claims and further damages connected to the harm the firm's failure to produce documents caused his clients. Arbitration is the primary forum for investor complaints.

Microsoft Office 2007 Beta 2 is out: That doesn't mean you should use it now. But if you're semi-curious of what Microsoft has in store for you, Computerworld has a preview -- click here.

The French Open Tennis begins this Sunday: Set your TiVo.

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. 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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