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8:30 AM EST Wednesday, May 31, 2006:
"Compelling values? I don't see any."
"Sell in May and go away."
"That was a ringing vote of no confidence in our proposed new treasury secretary, Henry Paulson."
"All the buyers were still at the beach."
"Hedge funds were selling to get money to pay their deserting investors."
"Wal-Mart's lousy sales spooked the market."

Such were the explanations I heard for yesterday's huge drop on Wall Street. The most intelligent came from a hedge fund manager who actually made a little money yesterday (his shorts saved him). Said my wise fund manager:

"I never know why anything happens. Stockmarkets are random."

There was good news yesterday:
1. Confidence in Europe's economy is at its highest in five years as German retail sales jumped and unemployment fell.
2. India's economy -- Asia's fourth largest -- grew at 9.3% in the March quarter. That's the fastest after China among the 20 biggest economies in the world.

The future looks dreary for stockmarkets. Interest rates have popped, making bonds suddenly very attractive:



So what's with our proposed new Treasury Secretary? For one, Paulson is an interesting man. As head of Goldman Sachs, he's the most powerful man on Wall Street. He's good at making money for himself -- he earned more than $38 million in 2005 -- and Goldman Sachs, which is very profitable. However, he's not exactly a shining White Knight. Writes SmartMoney:

Paulson is central in the ongoing, $140 million case that New York Attorney General Eliot Spitzer filed in May 2004 against former New York Stock Exchange chairman Dick Grasso over his pay package. For those with short attention spans, Grasso was ousted a couple of years back after he essentially backed his limo up to the Exchange doors and the board of directors filled the trunk with $140 million in compensation. It wasn't theft, mind you. Rather, his contract, approved by the board, made him entitled to it. But folks got a bit squeamish when the details came out and the board ousted Grasso. Spitzer, who never met a Wall Street scandal he didn't want to capitalize on, subsequently filed a lawsuit, claiming the pay package given by one of America's premier symbols of capitalism and profit violated the state's not-for-profit laws. Grasso and longtime friend and NYSE director Ken Langone, though, fought back, and both have shown few signs of settling.

Reuters-AFP photo

What does this have to do with Paulson? Well, he's widely credited for leading the boardroom coup that pushed out Grasso. If it were a simple story of a man of good conscience seeing a wrong and working against all odds to right it, Bush would have no problem with the latest pick. But Paulson's role is murkier. He was no average board member, but rather a member of the very compensation committee that approved the Grasso pay package in the first place. Paulson has contended he wasn't aware of the full details. In fact, as part of the investigation into the pay package, Paulson said he didn't attend a large chunk of the committee meetings and wasn't sure how much Grasso was paid. If the NYSE had been a public company at the time, shareholders would have shown up at Paulson's door with torches and pitchforks. In this era of supposedly better governance, directors are, after all, expected to show up rather than go bird watching. And, when you do warm your board seat, you should at least stay awake.

Eventually, Paulson became aware of the size of Grasso's pay and immediately began pushing for the chairman to not take big lump-sum payments. But the issue wasn't that Paulson didn't think Grasso was entitled to the money. It was just what Paulson, in testimony, called the "optics" of it all. Essentially, it looked bad to take it. Not quite the moral crusader his backers make him out to be.

When the case eventually gets to trial, most eyes will be on Paulson. It could be a no-win situation for him. He will surely come across as asleep at the switch, despite his eleventh-hour conversion. True, there will be a parade of big names on the compensation committee who will also say they nodded off every time the topic of compensation was brought up, but none of them will be Treasury secretary, with the fancy office and a signature on every dollar bill. It might tempt the Chinese to even start talking about deferred retirement formulas to lull Paulson into slumber just when the topic of freeing its currency comes up. Stranger things have happened.

Paulson's progress: The Economist online had this piece today:

AFTER months of speculation, the death watch for John Snow’s lacklustre stint as America’s treasury secretary is finally at an end. On Tuesday May 30, George Bush nominated Henry Paulson, who is currently the head of Goldman Sachs, to take over from Mr Snow.

A sharp drop in America’s stockmarkets followed the announcement and undoubtedly caused a nasty shock at the White House. But that appeared to be due to other news, of disappointing sales at Wal-Mart, rather than a reaction to Mr Paulson, who is widely admired on Wall Street. Indeed, comparisons will undoubtedly be made with Robert Rubin, an earlier Goldman Sachs chief who became treasury secretary under President Bill Clinton. Under his stewardship, America successfully rode out several international financial crises, and enjoyed a long period of robust growth and deficit reduction.

Mr Bush, who previously disdained Wall Street types in favour of business bosses, may have appointed Mr Paulson as a form of crisis insurance. This time, however, the crisis is likely to stem not from distant emerging markets but from America’s gaping current-account deficit, which now stands at over $800 billion. The growing difference between the value of what America sells abroad and its huge appetite for imports has some extremely worried. If creditors lose their appetite for vast quantities of American securities the risk is greater volatility of — or a big drop in the value of — the dollar. Managing that, and other consequent stresses on financial markets, will be easier if the treasury secretary commands the respect of the world’s financial markets.

That presumes, however, that Mr Paulson can keep their respect. That has proved a challenge for recent treasury chiefs. In large part this is because the administration has seen the incumbent’s main task as selling policy made in the White House based largely on political concerns. The secretary, of course, would rather use his financial and economic expertise to help shape policy. For Mr Snow, that translated into promoting Mr Bush’s tax cuts despite large budget deficits (though these have declined recently). Mr Snow lost whatever credibility he brought to the office as he appeared to argue that tax cuts, alone, were responsible for economic performance. Worse, for Mr Paulson, a brain drain at lower levels in the Treasury leaves the secretary without the sort of deep technocratic policy apparatus that Mr Rubin once enjoyed.

A happier thought is that by appointing a heavyweight financial type, the administration may be suggesting that it is ready to give the treasury, once more, a big role in policymaking. Even if that were true, however, there seems limited opportunity for the new man to make a big impact. With only a little over two years left on Mr Bush’s term, his poll ratings are at record lows, and his allies in Congress are facing a tough mid-term election.

Moreover, the White House seems likely to spend its limited political capital on preserving and extending its changes to the tax code, rather than any more big new initiatives. The administration has tried to push forward on other fronts, notably free trade and the Doha development round, staving off congressional protectionism towards China and promoting Social Security reform. But it has met fierce political opposition and has been badly bruised as resistance to free trade persists on both sides of the Atlantic. As for Social Security, a Medicare prescription drug programme is likely to prove extremely costly.

But Mr Paulson has survived and flourished in one of the most fiercely competitive environments in the world. Under his leadership, Goldman Sachs has been even more profitable than it was under Mr Rubin. And though some see storm clouds ahead, he will take the helm of the Treasury during an unusually placid time, with robust growth around the world. If troubles do come, Mr Paulson will have had some time to batten down the hatches and gain the confidence of the crew.

So how goes the world for GM? It has plenty of cash. It can buy out its workers. And it can buy its customers. Try this: The company has announced a "fuel price protection program." If you live in Florida or California and buy certain GM vehicles by July 5, the company will guarantee you gasoline at a cap price of $1.99 a gallon for one year — with no limit on mileage. Fuel usage will be calculated by the miles you drive, as recorded by OnStar, and the vehicle's fuel economy rating. G.M. will credit drivers the difference between the average price per gallon in their state and the $1.99 cap." Consumers won't get any credits if gas prices fall below $1.99. (Fat chance.)

Of course, there's a gotcha. Only GM's largest, biggest gas-guzzling vehicles are eligible, including -- the 2006 and 2007 Chevrolet Tahoe and Suburban (half-ton models only), the G.M.C. Yukon and Yukon XL SUV's (half-ton models only), Hummer H2 and H3 S.U.V.'s, the Cadillac SRX SUV., and the Pontiac Grand Prix and Buick Lucerne sedans.

As an example, the 6,400-pound Hummer H2 averages around nine miles per gallon. The Chevy Suburban gets around 15 miles per gallon.

In cas you didn't know, sales of these big vehicles have plummeted recently as gas prices have risen and stayed high. GM's marketing plan is actually very creative!

Delicious Microsoft engineering. There's a small problem with my new Toshiba laptop. The screen shuts off at weird times. I asked Toshiba. They said Microsoft would shortly release a "QFE." What is a QFE, I asked? Why "Quick Fix Engineering, of course."

The Dangerous Side of Search Engines: Search engines may lead you to rogue sites, which can load your PC with bad software -- just by visiting the site. From a recent issue of PC World:

Who knew an innocent search for "screensavers" could be so dangerous? It may actually be the riskiest word to type into Google's search engine. Odds are, more than half of the links that Google returns take you to Web sites loaded with either spyware or adware. You might also face getting bombarded with spam if you register at one of those sites with your e-mail address.

A recently released study, coauthored by McAfee and anti-spyware activist Ben Edelman , found that sponsored results from top search engines AOL, Ask.com, Google, MSN, and Yahoo can often lead to Web sites that contain spyware and scams, and are operated by people who love to send out spam.

The study concluded that an average of 9 percent of sponsored results and 3 percent of organic search results link to questionable Web sites. ... According to the results of the study, the most dangerous searches on Google are those with downloads containingds contain spyware and/or adware; its pages contain embedded code that performs browser exploits; the content is meant to deceive visitors in some way; it sends out inordinate amounts of spam to e-mail accounts registered at the site. ..

"Scammers and spammers have clearly turned to search engines to practice their trade," says Shane Keats, market strategist for McAfee.

McAfee says that of the 1,394 popular keywords it typed into Google and AOL alone, 5 percent of the results returned links to dangerous Web sites. Overall, MSN search results had the lowest percentage of dangerous sites (3.9 percent) while Ask search results had the highest percentage (6.1 percent).

Given the study's findings, it shouldn't come as a big surprise that the company has a free tool, called McAfee SiteAdvisor, for tackling the problems. In my tests I found it does a great job of protecting you from the Web's dark side.

Since March McAfee has been offering a browser plug-in that works with Mozilla Firefox and Microsoft Internet Explorer. SiteAdvisor puts a little rectangular button in the bottom corner of the browser. If a site you're visiting is safe, the SiteAdvisor button stays green. When you visit a questionable Web site the button turns red or yellow (depending on the risk level) and a little balloon expands with details on why SiteAdvisor has rated the site as such. ..

SiteAdvisor takes it a step further with Google, MSN, and Yahoo. With these search engines, it puts a rating icon next to individual results. This is a great safety feature and time saver, steering you clear of dangerous sites before you make the mistake of clicking on a link.

For example, when the site Screensaver.com appeared in my Google search results, a red SiteAdvisor warning appeared next to it. When I hovered over the icon, it delivered stats on the site . According to SiteAdvisor, Screensaver.com offered a download that contained what some consider adware or spyware, and any e-mail address I used to register with the site would receive about 47 "spammy" e-mails a week. ..

SiteAdvisor says it has preformed a security analysis of 3.3 million Web sites using an automated process. According to McAfee's Keats, SiteAdvisor collects these sites by constantly crawling the Web using hundreds of computers. Its analysis includes checks for deceptive sites and browser exploits. But SiteAdvisor goes a step further and downloads any software that a site may offer visitors, then checks it for spyware and adware. Keats says SiteAdvisor has reviewed over 725,000 software titles so far.

To evaluate spam levels, SiteAdvisor has registered a unique e-mail address at 2.5 million sites. It then weighs the volume of e-mail that each account gets and evaluates how spammy the messages are.

SiteAdvisor software calculates the risk that a site poses based on those criteria and assigns it either a green, yellow, or red label. A red site fails SiteAdvisor's safety tests because it either distributes adware, sends a high volume of spam, or makes unauthorized changes to your PC. Yellow sites send a high volume of "non-spammy" e-mail, display many pop-up ads, or prompt a user to change browser settings. Green sites are safe.

With SiteAdvisor, you may learn that some sites you wouldn't think would be problems are. For example, it turns out if you register with the United Nations Web site you'll get 57 e-mails a week. And you'll get 24 e-mails a week if you register the official South Beach Diet site .

Currently, SiteAdvisor is available for free (click here), and McAfee plans to deliver a premium version of its product by September...

This is truly sick and NOT funny (except in a very sick way):
The phone rings and the lady of the house answers, "Hello."

"Mrs. Ward, please."

"Speaking."

"Mrs. Ward, this is Doctor Stevens at the Medical Testing Laboratory. When your doctor sent your husband's biopsy to the lab yesterday, a biopsy from another Mr. Ward arrived as well, and we are now uncertain which one is your husband's. Frankly the results are either bad or terrible."

"What do you mean?" Mrs. Ward asks nervously.

"Well, one of the specimens tested positive for Alzheimer's and the other one tested positive for AIDS. We can't tell which is your husband's."

"That's dreadful! Can't you do the test again?" questioned Mrs.Ward.

"Normally we can, but Medicare will only pay for these expensive tests one time."

"Well, what am I supposed to do now?"

"The people at Medicare recommend that you drop your husband off somewhere in the middle of town. If he finds his way home, don't sleep with him.

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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