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Table of Contents
1. Feature Article: Socially Responsible Investing: Is It Possible?
2. Industry Profile: Software
3. Tip of the Month
4. Questions and Answers

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Feature Article: Socially Responsible Investing: Is It Possible?
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You hear a lot about socially responsible investing. There are even mutual funds that advertise a socially responsible investing style. However, don't be tricked into thinking that if you avoid oil, tobacco and a few other supposedly questionable industries you can invest with a clear conscience.

Computer hardware companies use hazardous chemicals and create toxic wastes when they produce silicon chips, hard drives and other computer components. Why do you think some of the early Intel commercials showed workers in protective suits? The chemicals used for making these products are so toxic that the workers must be protected from exposure.

Banks use deceptive lending practices to lure students and other consumers into racking up credit card debt. Personal bankruptcies are currently at an all-time high. These same banks are spending billions of dollars lobbying Congress to pass legislation that would make it very hard for most individuals to declare bankruptcy. Is this type of behavior socially responsible?

Auto manufacturers are notorious for dragging their feet on complying with environmental regulations designed to control harmful emissions, and for delaying safety improvements. I have a friend who works at one of the local auto plants. He claims that recently a defect was discovered in one of the car models that on rare occasions causes scalding water to leak from the dashboard. To fix the problem would require adding a clamp to a hose at a cost of a few cents per vehicle. However, the auto company refuses to acknowledge or fix the problem.

The truth is that capitalism, by its very nature, is not socially responsible. Throughout the history of capitalism, governments have had to regulate company behavior to protect workers, customers and society in general. Child labor laws were enacted in the United States to protect companies from exploiting young children. The Occupational Safety and Health Administration (OSHA) was created to protect workers from unsafe working conditions at factories and other job sites. The United States Environmental Protection Agency (USEPA) was created to deal with the enormous quantities of hazardous wastes that were being carelessly created, handled and discharged into the environment.

Unfortunately, while we have made some progress towards regulating company behavior in the United States, many of the problems mentioned above still exist in undeveloped countries. The same companies that must comply with government regulations designed to protect society in developed countries often do the opposite in undeveloped countries, where they are free to conduct business however they please.

Over the next century, society and capitalism must strike a better balance. You, as an investor, can play a role in this process by requiring that companies you invest in act responsibly, no matter what business they are in.

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Industry Profile: Software
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There has been much talk over the last several years about the difficulties facing technology companies. After an incredible decade in the 1990s, many professional investors are recommending that investors avoid technology companies. While there has been a necessary shakeup in the technology arena, the future still looks very bright, especially for well-managed software companies. If you haven't noticed, software is the engine behind technology. While many hardware companies are still having difficulties, software companies are starting to show some improvement. I have been a successful investor in software companies for over a decade. I think over the next 10 to 20 years, software will be one of the biggest success stories in technology. Here's why:

     (1) Inventory. Because it is an electronic product, it costs virtually nothing to store software. While hardware companies must maintain large production facilities and tremendous inventory, and incur large overhead expenses to maintain their plants and inventory, software companies have almost none of these expenses.

     (2) Profit margins. Again, largely because the costs for distributing and storing software are very low, the profit margins are typically very high. Look at successful software companies and you will find some of the highest profit margins in the world. Decreases in and control of software piracy, and electronic sales of software over the Internet will also increase profit margins going forward.

     (3) Hardware. Until recently, the ability and capacity of computer hardware actually limited what software could do. Now, hard drives, memory and even Internet bandwidth have improved drastically over the last few years. This greatly opens up the opportunities for software.

     (4) Bankruptcy/Lack of Investment. While the 1990s was a time for many technology companies to go public, this decade has been almost the opposite. With many technology companies going bankrupt and almost no technology companies going public over the last few years, the software companies that can survive the current downturn will likely prosper.

     (5) Demand/Personnel. Software can solve many business problems; however, the expertise required to create effective software products is high. Most businesses will need to buy many software products over the next decade to keep up with their competitors and run their businesses more effectively. The last decade proved that technology can drastically improve productivity and open up new business models and markets. Combine these factors and there will be a huge demand for software products, but very few businesses capable of providing the expertise to create these software products. The businesses that can consistently deliver software solutions for their clients and customers will do very well.

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Questions and Answers
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Last month I asked: Are government foreclosures a good investment?

For beginning real estate investors, government foreclosures are a great way to get started. Every year, thousands of home owners with government insured loans can't make their mortgage payments. When this happens the government must take over the mortgage, and its goal then is to sell the property as fast as possible. Often, the government allows investors to buy the foreclosed properties will little or no money down. The two largest sources of government foreclosures are the Veterans Administration (VA) and the Department of Housing and Urban Development (HUD). Anyone can obtain a list of the government foreclosures for sale in their area. If you have good credit and are willing to make a quick decision (many properties require a bid within several days of the listing), you can purchase government foreclosures. These properties usually require some repairs, but make great rental houses. In some cases, you can find newer properties that could become your own home. For more information on government foreclosures, visit: http://www.rogueinvestor.com/real_estate_investing.html.

Next month's question: What are the two most important things you need to do to sell a house quickly, with almost no hassles?

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Disclaimer: There are no guarantees in investing. I make no assurances regarding the investment information presented in the Rogue Investing Report.

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