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Harry Newton's In Search of The Perfect Investment Newton's In Search Of The Perfect Investment. Technology Investor.

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8:30 AM EST Wednesday, October 4, 2006: There's muted cheering. Dow set a new high yesterday. Its close broke the record of 11.722.98 set on January 14, 2000. The Dow is the narrowest of all major stockmarket indices. It measures only 30 stocks. Even then, only 10 of the Dow 30 are higher than they were in 2000; 20 are lower. The three that have done best are Altria (formerly Phillip Morris), Caterpillar and United Technologies.

The worst performers, down by more than half from 2000, include two tech names the Dow added when it was trying to appear relevant – Intel and Microsoft. And GM is down by 65%.

The Nasdaq 100, which is filled with big tech names – is still down more than 55% from where it was when the Dow peaked in 2000. Four stocks in that index are off more than 85 percent: JDS Uniphase, Sirius Satellite Radio, Verisign and Sun Microsystems.

In short, it's not a cross-the-board victory celebration. Some people said the big caps were overdue for "a run." These same people believe tech stocks are now overdue for a run. Careful stockpicking remains the name of the game. How difficult is that? In 2006 so far, most hedge funds have had their worst year ever. When in doubt stay out.

Here are the companies in the Dow Jones 30 index:



MMM Diversified Industrials


AA Aluminum

Altria Group

MO Tobacco

American Express

AXP Consumer Finance

American International Group

AIG Full Line Insurance
T Telecommunications


BA Aerospace


CAT Commercial Vehicles & Trucks


C Banks


KO Soft Drinks

E.I. DuPont de Nemours

DD Commodity Chemicals

Exxon Mobil

XOM Integrated Oil & Gas

General Electric

GE Diversified Industrials

General Motors

GM Automobiles


HPQ Computer Hardware

Home Depot

HD Home Improvement Retailers

Honeywell International

HON Diversified Industrials


INTC Semiconductors

International Business Machines

IBM Computer Services

Johnson & Johnson

JNJ Pharmaceuticals

JPMorgan Chase & Co.

JPM Banks


MCD Restaurants & Bars

Merck & Co.

MRK Pharmaceuticals


MSFT Software


PFE Pharmaceuticals

Procter & Gamble

PG Nondurable Household Products

United Technologies

UTX Aerospace


VZ Fixed Line Telecommunications


WMT Broadline Retailers
Walt Disney Co
DIS Broadcasting & Entertainment

The Dow Jones average is price weighted rather than market capitalization weighted. The movement of the Dow is affected only by changes in the stocks' prices, in contrast with other indexes' weightings that are affected by both price changes and changes in the number of shares outstanding. When the average was initially created, its values was calculated by simply adding up the component stocks' prices and dividing by the number of components. Later, the practice of adjusting the divisor was initiated to smooth out the effects of stock splits and other corporate actions.

Stratfor's economic forecast. Stratfor is a leading private intelligence firm. It does seriously good work. Here are excerpts from its latest intelligence report:

The economic cycle finally has crested. The yield curve has inverted (albeit only slightly) and stayed that way; commodities of all sorts have come off of their highs; and growth in the United States and Asia is slowing, with the American housing market (finally) showing signs of strain. Only European growth is doing better than normal, having surpassed U.S. growth in the second quarter of 2006 for the first time since 2000. At roughly 2 percent on an annualized basis, however, European growth is hardly robust enough to resist the downdrafts from elsewhere.

Despite omnipresent signs of a slowdown, many investors are behaving as if global growth were accelerating, not stalling. Investment monies are flowing hot and furious into the developing world, and initial public offerings in particular are garnering record amounts despite an utter dearth of transparency, as with Russian state oil firm Rosneft, or a well-chronicled litany of shortcomings, as with the Chinese state-owned banks.

There is a fancy economics term for this: "irrational exuberance" or, more simply, a market top. And just as in physics, what goes up must come down. There is a not-quite-so-fancy economics term for that: "recession."

The fourth quarter will be a time of sliding asset and commodity values as slowing growth pulls the system back from its giddy highs. This is not a process that can happen overnight, however. U.S. growth is unlikely to dip into the negative until the first half of 2007, and a formal recession -- two consecutive quarters of negative growth -- is hardly a foregone conclusion. But make no mistake: At the end of 2006 it will have been 81 months since the last American recession ended, and the average U.S. expansion is only about 57 months. The United States is most certainly due for a correction. Now more than ever the Europeans and Japanese will be forced to depend on the resurgence of strong demand from the United States. Both Europe and Japan will follow the United States down, albeit with a lag of unlikely more than a quarter. Recessions in both places -- particularly in Europe -- tend to be a more protracted affair. This one is unlikely to be different except in one way. While interest rates in the United States have already returned to a "natural level" of 5.25 percent in the aftermath of the 2001 recession, in the eurozone they are only 2.75 percent, vs. only 0.25 percent in Japan. Unlike the United States, neither the Europeans nor the Japanese have many tools to get their economies going again when they start having problems.

Now more than ever they will be forced to depend on the resurgence of strong demand from the United States - which means that their recoveries will have to wait until after the American one has built steam. Chinese demand will help as well and we do not expect Chinese growth to slide along with the developed world. This is not because the Chinese economy is more resilient - hardly - it is because the Chinese economy is not based upon market principles. In the United States profitt and sustainability are the keywords; in China they are market share and maximum employment. Bottom lines are not important; maintaining a fast throughput of cheap loans is. Such a values disconnect does make one largely immune to the business cycle, but at the cost of rampant inefficiency, pervasive corruption and fraying social stability.

In other words, remain wary. Cash remains king, despite the Dow.

The other Google sites
1. looks different to normal Google -- no ads, but three neat images.
2. is a fast way to find cheaper ways of buying your shiny new thing. It's not comprehensive. It's a start.
3. is the best mapping service on the Internet.
4. is today's breaking news organized by category, including business, health and top stories.
5. All the many Google services, including Gmail, Picasa, Desktop search, Calendar, Translate and free software (including Google Pack screensaver) are available on "options." Click here.

Undelivered email is latest virus: Don't open attachments to emails that talk about "Delivery Status Notification (Failure)." The attachments contain viruses, worms and other nasties.

From my reader friend, Gene Tomba
Financial planners love to use money managers, hedge funds and mutual funds because the planner will take no blame for losses. The planner can always say "Those hedge fund managers are idiots! Let's fire them right now! I'll never use them again (to make the client feel good)"!! That is why the "Financial Planning" business is a farce now. They have become salesmen, not planners.

From my friend Dan Good:
Anyone who needs a so-called financial planner is pretty dumb financially to start with. We once had financial planning service which was offered to unsophisticated investors. It probably was somewhat useful to them (widows and orphans, so to speak) but useless to anyone with financial savvy. If you ever interview a representative, in the first five minutes you would conclude these types were nothing but salesmen.

Little OTCBB stocks
From Dennis Mykytyn, hedge fund manager: "Not for me. These crappy otcbb stocks can make you money in the short term, long term somebody is left holding the bag. I don’t like to be the bag holder."

Seems a little steep. I found this in a venture proposal.

Under the Company's operating agreement, management shall receive an annual management fee equal to $300,000 and a 10% incentive fee on the gross profit of the Company, as well as 10% of the cash contributed to the Company for structuring, negotiating, and providing other services to the Company. The gross profit of the Company shall include, without limitation, the operating income generated from subsidiaries and joint ventures engaged in manufacturing or in similar activities. Going forward, the Company intends to maintain a low-cost operation so as to keep corporate overhead to a minimum.

Want to say Thank You meaningfully? Assemble your photos into a memory book. For a big collection, try the Kodak Gallery. Click here

Are BlackBerries making us dumb? ComputerWorld magazine wonders if "BlackBerries are developing a generation of workers who can't make independent decisions. ... These dooes are developing a cyclical co-dependence." I just cancelled my subscription to BlackBerry email. I didn't need the freneticsm. Laptops work better answering emails. Cell phones work just fine when there's something urgent.

El-Coli victim finally laid to rest

An old telecom guy like me. This ad threw me.

This could happen to you
I was barely sitting down when I heard a voice from the other stall saying: "Hi, how are you?"

I'm not the type to start a conversation in the restroom but I don't know what got into me, so I answered, somewhat embarrassed, "Doin' just fine!"

And the other person says: "So what are you up to?"

What kind of question is that? At that point, I'm thinking this is too bizarre so I say: "Uhhh, I'm like you, just traveling!"

At this point I am just trying to get out as fast as I can when I hear another question. "Can I come over?"

OK, this question is just too weird for me but I figured I could just be polite and end the conversation. I tell them "No.......I'm a little busy right now!!!"

Then I hear the person say nervously... "Listen, I'll have to call you back. There's an idiot in the other stall who keeps answering all my questions.

How to interpret art
A couple attending an art exhibition at the National Gallery was staring at a portrait that had them completely confused. The painting depicted three very black and totally naked men sitting on a park bench. Two of the figures had black weenies, but the one in the middle had a pink weenie.

The curator of the gallery realized that they were having trouble interpreting the painting and offered his assessment. He went on for nearly half an hour explaining how it depicted the sexual emasculation of African-Americans in a predominately white, patriarchal society. "In fact," he pointed out, "some serious critics believe that the pink weenie also reflects the cultural and sociological oppression experienced by gay men in contemporary society."

After the curator left, a young man in a Kentucky T-shirt approached the couple and said, "Would you like to know what the painting is really about?"

"Now why would you claim to be more of an expert than the curator of the gallery?" asked the couple.

"Because I'm the guy who painted it," he replied. "In fact, there are no "African-Americans" depicted at all. They're just three Kentucky coal miners. The guy in the middle went home for lunch."

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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