Previous Columns
8:30 AM EST, Friday, September 21, 2007: It's scrounge time. Take your cash and find a beaten-down asset that's ready to bounce back. Goldman Sachs was the classic.

There are obvious problems: Figuring if it bounces back versus staying down. And beating everyone else (who has the same strategy) to the punch. The stockmarket has full information. Today -- and going forward for the next year -- I'd prefer to pounce on cheap local real estate. Few people will know about it -- at least fewer than are in the stockmarket. You can bring some control -- curry favor with local bankers, etc. The odds are in your favor.

You need to tell local brokers, local banks, etc. you're interested and stay in touch. Generating deal flow is critical.

Canadian Oil Sands Trust has been a lousy investment: But the high price of oil should save it, I'm praying since I own a little. My friend Jim Kingsdale writes Energy Investment Strategies. His latest post:

Alberta, the New Venezuela. Not.

On Wednesday September 19th, a study commission released a report to the government of Alberta saying that oil and gas companies operating in the province should be taxed about 20% more than currently is the case. The reactions were interesting:

— Dennis Gartman, a well-followed, commodity sensitive commentator and investor excoriated the announcement in extreme terms and said he was selling all Canadian equities, never to look back (unless, one presumes, the Province rejects the recommended tax increases).

— Marathon Oil, which has proposed to buy Western Oil Sands for nearly $6 billion, said the deal will go through. They suggested that the new tax proposal was already in their numbers but also said it might impact their capital spending plans. Why would they want to buy a company in which they hesitate to make further investments for growth? Their capex caveat seems like a rather weak version of the “Shocked, shocked” reaction required of any company toward any new tax.

But I was also disappointed. The recommendation reminds one of the Venezuelan approach to resource development, which is producing such disastrous results. On the other hand, my disappointment is mitigated somewhat by the fact that the new taxes are partially designed to repair the environment upon completion of the projects, which is a worthy and altogether appropriate reason for a tax. Also, I still do not believe the government of Alberta has any interest in being confiscatory or in denying investors a reasonable — even an excellent — return, unlike the base attitude of Dr. Chavez.

I sold two oil sands holdings that still require major capital investments in order to reach positive cash flow. Financing for such investments could suffer. On the other hand, I am keeping my core position in Canadian Oil Sands, which has its investments in place, is growing its cash flow enormously based on higher, non-hedged oil prices, and which pays a 5% dividend, which grows with the depreciating dollar and promises to grow further with the company’s cash flow. In fact, I think this recent pullback is an opportunity to add to holdings of COSWF.

The bottom line of investments in the oil sands is that they really will pay off if the price of oil not only goes higher but goes much higher. That, in fact, is exactly what the price of oil will do the closer we get to peak oil. And since peak oil is only a matter of time, it seems like investments in the oil sands are as close to a sure thing as we are likely to find, if one has patience.

In terms of the actual impact of this proposed tax, let us note that taxes (to simplify the matter) are currently 25% of profits for COSWF. If they are increased 20%, they will become 30% of profits. Taxation calculations at COSWF are complex, but I would estimate that a 5% greater tax on profits could equate to something like a 3% reduction in cash flow. On the other hand the price of oil today is about 17% higher than it was just a few weeks ago ($82 vs. $70). That higher price goes directly to the bottom line. It equates to a roughly 40% increase in cash flow. So I find it hard to be too disappointed in the possible loss of 5% of profits when my investment’s cash flow has just been increased by 40%, or 37% net of a proposed but not yet enacted tax.

Bottom line: higher oil prices make for very happy times for Canadian Oil Sands Trust regardless of this tax proposal. The oil price won’t keep going straight up, but the long term trend is clear. There are days (months) when the rain will fall on oil, but a sunny future is virtually assured in terms of higher oil prices. (Incidentally, I plan to address the moral dimensions of rooting for a higher oil price at a future time. Short take: higher oil prices are the best thing that can happen for the long term health of our society and economy. It’s why we need a carbon tax.)

Retire at 50 - guaranteed.
PARIS: President Nicolas Sarkozy will face his first strike after five of the eight railroad unions in France called for a day of protests on Oct. 18, vowing to defend their members' right to retire at age 50.

The strikes will be a test of labor's strength against Sarkozy's resolve to overhaul pension privileges enjoyed by 500,000 public-sector employees.

Labor unions said that the strike could last more than 24 hours if Sarkozy did not take their grievances into account and some warned that France could face weeks of mass protests. In 1995, a three-week transport strike paralyzed the country and forced Sarkozy's predecessor, Jacques Chirac, to withdraw a revision of public sector pensions.

P.S. The government of France is virtually bankrupt.

The Piracy Paradox. Here's James Surowiecki's latest piece in the New Yorker. It's totally wonderful. I love this sort of reverse logic:

In 1932, a group of American fashion manufacturers found themselves beset by a proliferation of cheap knockoffs. Designs, then as now, were not protected by patents or copyrights, so the manufacturers decided to take direct action to stop the copying. They set up the Fashion Originators Guild of America to monitor retailers and keep track of original designs; if you look at vintage dresses from the thirties, you can find labels reading “A registered original design with Fashion Originators Guild.” Retailers selling knockoffs were “red-carded,” and guild members wouldn’t sell their merchandise to red-carded stores. This was unpopular with the retailers, but it seems to have put a damper on the copying. The only hitch in the plan was that it was illegal: in 1941, the Supreme Court ruled that the manufacturers’ arrangement violated antitrust law, and the knockoff artists stayed in business.

In the decades since, copying has remained ubiquitous in the fashion industry. Fashion-forward but low-priced retailers like H & M and Zara have flourished, thanks to their ability to take designs from Milan to the mass market. Private-label designers for major department stores trumpet the fidelity of their imitations. And almost as soon as hot new designs appear on the runway, photographs and drawings of them are on their way to Chinese factories that can produce reasonable facsimiles at a fraction of the cost. Designers are as annoyed by this as their prewar forebears were, and so Congress now finds itself considering a bill, pushed by the Council of Fashion Designers of America, that would give original designs a legal protection similar to copyright.

Designers’ frustration at seeing their ideas mimicked is understandable. But this is a classic case where the cure may be worse than the disease. There’s little evidence that knockoffs are damaging the business. Fashion sales have remained more than healthy—estimates value the global luxury-fashion sector at a hundred and thirty billion dollars— and the high-end firms that so often see their designs copied have become stronger. More striking, a recent paper by the law professors Kal Raustiala and Christopher Sprigman suggests that weak intellectual-property rules, far from hurting the fashion industry, have instead been integral to its success. The professors call this effect “the piracy paradox.”

The paradox stems from the basic dilemma that underpins the economics of fashion: for the industry to keep growing, customers must like this year’s designs, but they must also become dissatisfied with them, so that they’ll buy next year’s. Many other consumer businesses face a similar problem, but fashion—unlike, say, the technology industry—can’t rely on improvements in power and performance to make old products obsolete. Raustiala and Sprigman argue persuasively that, in fashion, it’s copying that serves this function, bringing about what they call “induced obsolescence.” Copying enables designs and styles to move quickly from early adopters to the masses. And since no one cool wants to keep wearing something after everybody else is wearing it, the copying of designs helps fuel the incessant demand for something new.

The situation is not necessarily easy on designers, who have to keep coming up with new ideas rather than being able to milk a trend for years. But it means that in the industry as a whole there is more innovation, more competition, and probably more sales than there otherwise would be. And the absence of copyrights and patents also creates a more fertile ground for that innovation, since designers are able to take other people’s ideas in new directions. Had the designers who came up with the pinstripe or the stiletto heel been able to bar others from using their creations, there would have been less innovation in fashion, not more.

If copying were putting a serious dent in designers’ profits, it might slow the pace of innovation, since designers would have less incentive to produce good work. But while knockoffs undoubtedly do steal some sales from originals, they are, for the most part, targeted at an entirely different market segment—people who appreciate high style but can’t afford high prices. That limits the damage knockoffs do, as does the fact that fashion is one of the few industries in the world where people are still willing to pay a considerable premium to own original brands instead of imitations. (That’s why counterfeits, which pretend to be original products, are illegal.) The best evidence of this is the fact that luxury-goods makers, far from cutting their prices in response to the knockoff boom, have instead been able to raise prices consistently. In fact, given the importance to fashion of what the law professor Jonathan Barnett calls “aspirational utility”—the enjoyment people get from imitating the life style of the rich and famous—one might think of knockoffs as being like gateway drugs: access to the lower-quality version makes buyers all the more interested in eventually getting the real stuff.

The fashion industry is not alone in its surprising mixture of weak intellectual-property laws and strong innovation: haute cuisine, furniture design, and magic tricks are all fields where innovators produce new work without being able to copyright it. This doesn’t mean that we can always do without copyrights and patents, and fashion has unique characteristics that limit the damage that copying can do: it’s relatively cheap to come up with new designs, there’s a culture of novelty, and people are willing to pay more for the right brands. But we should be skeptical of claims that tougher laws are necessarily better laws. Sometimes imitation isn’t just the sincerest form of flattery. It’s also the most productive.

A friend suffers heart attack: He's in the gym working out. Suddenly he feels "an elephant on his chest." He gets very cold. He is sweating and shivering. He's having a heart attack. They get him to the hospital. Within 30 minutes, they have a stent in him. "The moment they put the stent in the pain disappeared instantly," he told me. A day later the doctor tells him he had a "massive" heart attack. One of his key arteries was 99.5% blocked. The doc says my friend will now lead a "normal" life. Facts: my friend is 51, has normal blood pressure and low cholesterol. Apart from being 20 lbs overweight, he's normal. The heart attack was a fluke. He was essentially saved by insisting on being taken to Lenox Hill Hospital, which is skilled at stents.

Lessons from this: Find out now which of your local hospitals is best at dealing with heart attacks. Note: You can do zillions of heart scans and stress tests. He'd had them. But none of them will protect you against a fluke blockage -- which is what happened to my friend.

One of those wonderful moments: I got my hair cut yesterday. A nice lady was sweeping up the gray hair. I said, "Save the hair. My fans will pay millions." Without batting an eyelid, she replied, "So, find me one."

Amazingly simple home tips
1. If you are choking on an ice cube, don't panic. Simply pour a cup of boiling water down your throat.

2. Avoid arguments with the Mrs. about lifting the toilet seat by using the sink.

3. A mouse trap, placed on top of your alarm clock, will prevent you from rolling over and going back to sleep after you hit the snooze button.

4. If you have a bad cough, take a large dose of laxatives. Then you will be too afraid to cough.

5. Chapped lips? Rub dog poop on them. It won't ease the chapping, but it will keep you from licking them.

6. You only need two tools: WD-40 and duct tape. If it doesn't move and should, use the WD-40. If it shouldn't move and does, use duct tape.

The bacon tree
Back in cowboy times, a westbound wagon train was lost and low on food. No other humans had been seen for days and then the pioneers saw an old Jewish rabbi sitting beneath a tree. "Is there some place ahead where we can get food?" they asked.

"Vell, I tink so, " the old man said, "but I wouldn't go up dat hill und down de udder side. Somevun tole me you'd run into a big bacon tree."

"A bacon tree?" asked the wagon train leader.

"Yah, an bacon tree. Vould I lie? Trust me. I vouldn1t go dere."

The leader goes back and tells his people what the rabbi said.

"So why did he say not to go there?, " a person asked.

Other pioneers said, "Oh, you know those Jewish people - they don't eat bacon."

So the wagon train goes up the hill and down the other side. Suddenly, Indians attack them from everywhere and massacre all except the leader who manages to escape and get back to the old rabbi.

Near dead, the man shouts, "You fool! You sent us to our deaths! We followed your route but there was no bacon tree, just hundreds of Indians who killed everyone but me."

The old Jewish man holds up his hand and says, "Oy, vait a minute." He quickly picks up an English-Yiddish dictionary and begins thumbing through it.

"Oy Gevalt, I made myself such ah big mishtake! It vuzn't a bacon tree, it vuz a ham bush!!

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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