Court the King (Cash) in 2005.

by Natalie Pace, editor in chief and founder, NataliePace.com.

In 2005, risks are high in the stock market, and the potential for gains is much more limited than it was in 2003, and even in the lackluster 2004. As a precursor for the efficacy of applying historical trends and current market conditions to come up with annual forecasts, note that in 2003, NataliePace.com predicted a banner year for the markets. The year finished out with the NASDAQ up 45%, and the Dow Jones Industrial Average up over 20%. In 2004, we called for a "day-trader's paradise," a year where money could be made by capitalizing on stock market volatility. Last year, the S&P500 and the NASDAQ were up 10%, while the Dow Jones Industrial Average posted 5% gains. In fact, I have been using these measures and statistics to outperform the stock market since 1999. I stayed on the sidelines in 2000, anticipating the fall, and made over 200% returns in 2001, another down year.

In 2005, the risks appear to be much greater than the rewards, and your best protection against a negative return in any segmentÑreal estate, stocks, bonds--is educating yourself, diversifying your portfolio, limiting your "buying" and cashing in profits in any sector that has posted better-than-average gains.

For bonds, though they will suffer in an environment of rising interest rates, selling low is never a good strategy. As bond specialist, Meri Anne Beck-Woods points out, "In 1987, when the stock market dropped over 500 points, interest rates on 7-year bonds soared to almost 10%. That made them very competitive with the long-term return on stocks." Rather than sell your bonds now for a loss, you might wait for a dismal day in the stock markets when investors are spooked and flee to the other side of the investment aisle. Quality counts, however.

In 2005, the first year of the new presidential term, there is a 37% chance of a negative annual return in the stock market. Additionally, average returns during the first year of a presidential term are only 7.45%, the lowest return, statistically, in the four-year term cycle (based upon data from the S&P 500, average gains from 1928 through 2002). See Paul Woods article, "Election Hangover," in this issue for more statistics on market returns.

Outside of those historical trends, Cash is King is the reigning strategy when a country enters a cycle of rising interest rates, rising inflation, rising medical care costs, trimmed back pension plans and flat, but volatile stock markets. What that means is that if you are in a position to do some profit-takingÑi.e. If a segment of your portfolio has posted a lot of gains, you should meet with your accountant, your real estate advisor and your stock broker to discuss realigning the diversification of your portfolio to a more cautious position with an increased percentage in cash. As Sally Krawcheck, the CFO of Citigroup advises: "What your financial services provider should be doing is not to get you in and out of segments of the market on a rapid-fire basis, but to give you a diversified portfolio. When the stock market goes up, you take some profits out. When fixed income goes up, tilt it that way."

What are the experts are predicting for 2005?
1. Accounting Tricks: "Special charges appear to be on the rise and investors need to be on their guardÉ Analysts look at the difference between "as-reported" earningsÉ and operating earningsÉ The difference was only 12% in the 4^th quarter of 2003. It has grown to 18%, according to Standard and Poor's. But it's nowhere near as bad as it was in the 4^th quarter of 2002, when the difference É was 75%."

Steve Liesman, "Investors Beware: Earnings Quality Slips":
http://moneycentral.msn.com/content/CNBCTV/Articles/TVReports/P107205.asp

2. Pension Funds: "Pension funds are another accident waiting to happen. Given the pig in the pie fund of baby boomers in the age structure of the country, the importance of deploying capital rapidly to find higher yields is a pressing one. Regulations and band-aids, as we learned from the S&L crisis, are no substitute for aggressive diversification strategies, especially for those institutions that have to meet long-term liabilities."

Glenn Yago, Director of Capital Studies, Milken Insitute, an economic think tank

3. Election Hangover: "The calendar year immediately following a U.S. presidential election is not usually a strong one for the stock market. Since 1949, the S&P 500 has risen only 3.6%, on average, in the first year of a President's termÉ We believe that the S&P 500 will perform somewhat better than has been typical in the first year of a second term. Our yearend target for the index is 1300, or 7.3% higher than its 2004 close."

Joseph Lisanti, editor, Standard and Poor's The Outlook, January 18, 2005

4. Made-Up Earnings: "Any company that wins at beat-the-number on a regular basis most likely made it up. Multibillion-dollar businesses are far too complicated to be able to hit a number within a penny, time and time again. Could any of you project for me what your checkbook balance will be at the end of the month?" Bill Fleckenstein, Fleckenstein Capital

5. Market Volatility High: "In 2004, there was only a 14.1% difference between the high and low on the S&P 500. That compares with 38.9% in 2003 and an average spread of 33.8% since 1928. We think there's a good chance that volatility will increase this yearÉ One reason is that we expect an increase in merger and acquisition activity that will cause an influx of "hot money" trying to anticipate the next deal. Non-financial companies in the S&P 500 have about $600 billion in cash on their balance sheets." -- Joseph Lisanti, editor, Standard and Poor's The Outlook, January 24, 2005

6. Caution on Real Estate: "Overall, this is a time for caution, a return to fundamentals, and perhaps a more conservative approach to home buying. It appears that the market has fully adjusted to lowered interest rates and that sustained price increases in the future are likely to be more dependent on job and income growth." Steve Dietrich, President of FRG, a real estate consultant firm, and a Guest Lecturer at the Anderson Graduate School of Business, UCLA.

7. Risk of Negative Returns in 2005: "Investors know that good things tend to happen to the economy in the years leading up to the election and any excesses are fixed afterward, and ...the risk of losing money in stocks doubles." Paul Woods, CEO, Odyssey Advisors.

Why should you increase the liquidity (cash) in your portfolio in 2005?

1. You will need more money to maintain your current standard of living.
2. There is a statistically significant chance that there will be a negative return in the stock markets.
3. Your pension plan and health care benefits are likely to be trimmed.
4. Real estate gains in many regions will flatten out or drop, while property taxes and mortgage payments will rise.
5. The person with liquidity, an ability to keep their finances afloat and capitalize on buying opportunities, will be in a far better position than someone who is banking on increased gains to bulk up their bottom line.
6. The stock and real estate marketsÑoutside of the NASDAQ--are higher than you think on the buy low: sell high continuum.

What can you do?

1. Look to create liquidity (your savings/cash on hand) whenever/wherever you can. That might mean trimming the contributions to your investments and increasing the contributions to your savings. That doesn't mean you won't be investing that money in the future. It means that you are waiting for a better buy-in opportunity.
2. Remember the flawless adage: "Buy low, sell high." Apply this to all your potential investments. In terms of the stock markets, the Dow Jones Industrial Average is at 10,427 (on 1.28.05). That is just 10% lower than its highs in January 2000. The DOW is no bargain these days, especially considering the increased costs of medical care, pensions and gasoline-related expenses (i.e. shipping, transportation, etc.). Alternatively, the NASDAQ is still off 50% from its January 2000 high, and 70% off of its March 2000 high. With a concentration of younger, technology companies, the NASDAQ has many companies that have posted incredible profit growth over the past few years. Many of these companies are not carrying the pension fund burden. On the buy low/sell high continuum, the NASDAQ is a much better bargain with a lot of real earnings growth, although you must pick your winner carefully.
3. Leaders with Real Growth: Buy low: sell high is not the only consideration for pruning your portfolio and evaluating the companies that you are invested in, but it is a key consideration. Look to cut out companies that are losing market share and or operating profits. Keep your investments in solid companies that are posting revenue and profit gains. Be very cautious about investing more money in any company before November 2005, unless you see tremendous opportunity for growth. If there is a market correction, it is very difficult for even the best companies to swim counter to the tide. You can view the financials of any company for yourself by going to MoneyCentral.msn.com, entering in the name of the company, and clicking on the financials tab in the left navigation bar.
4. Real estate has been on a run-up for years now, and thus many people are making less than prudent choices so that they can jump on the bandwagon, thinking that the party will continue and that future gains will make up for near-term risks. There are many real estate consultants who are warning that real estate is high and may have its own flattening or correction in the near future. Do not over-expose yourself in this buy high environment. One major disaster can wipe out real estate gainsÑnatural or man-made. In Southern California, this has occurred after earthquakes or during industry crises - such as when the defense industry had severe cutbacks on the first President Bush. In Florida, hurricanes devastate real estate. In your community, it might be as a result of a lay-offs or wage cutbacks. Terrorism is always a risk.

Pruning your portfolio.
When looking at taking profits and diversifying your portfolio, ask yourself these questions.

1. Companies: Is the company I'm invested in growing or are they using accounting tricks to meet or beat earnings? Is the management team experienced enough to lead the competition? Is the industry one that is likely to have significant challenges as a result of the rise in oil prices, health care costs and/or pension plan liabilities? Is the company poised to capitalize on those conditions, like energy (not utility), metals (not auto), technology and biotechnology? Bottom line: Get rid of the companies that are struggling. Keep the ones with real potential and real earnings.
2. Real estate: Is my community experiencing massive growth in jobs, in wages or is the real estate run-up only as a result of low interest rates? If it is merely a result of low interest rates, as interest rates rise, the buyers will thin out. Fewer buyers mean less competition and the need for homeowners to lower their prices in order to sell. "I would be very careful in my selection of a home and also in the amount of debt. I would not want to have to sell the home over the next few years." Steve Dietrich, President of FRG, a real estate consultant firm, and a Guest Lecturer at the Anderson Graduate School of Business, UCLA. See Steve's Q&A and article in NataliePace.com archived issues 53 and 54.
3. Portfolio diversification: Respected money managers are exercising "caution" and increasing the cash in their clients' portfolios. The rule of thumb is that you should have your age (as a percentage) in SAFE assets (i.e. Assets that will not lose their value, like savings). If you've had a few great years in the markets (and 2003 was a good year), then look to take some profits. The taxes on capital gains are not as prohibitive as they have been in the past, and by cashing in some of your profits, you ensure that those profits do not disappear in a market correction.
4. Do not risk your home equity on the Stock Market. See the NASD Investor Alert that appeared in NataliePace.com issue 56 (archived) for why this risky move could cost you your home. Also, check out the Q&A in this month's ezine.

There is a wealth of information in the archived editions of NataliePace.com's ezines. If you're looking for information on the best mutual funds, the sectors which will outperform and which will decline, real estate, bonds and/or why investing is more than shopping, click print and read the ezines in your down time. Instead of being a couch potato become a money magnet.

Election Hangover.

by Paul Woods, President & CEO, Odyssey Advisors, LLC.

Why the First Year of Bush's Second Term Could Be a Loser For InvestorsÉ.

For investors, most of 2004 looked like déjà vu, all over again. By the middle of the summer, investors faced the prospect of a 4^th decline in stocks in five years as valuations were under pressure and buyers were on vacation. As investors slowly returned at the end of the summer, a rally began in August that subsequently picked up steam after the election. November was the best month of the year, and higher stock prices in the fourth quarter allowed the market to finish the year with positive returns. Some of the angst in the stock market was caused by the expectation of higher interest rates, but the bond market mostly confounded investors by also finishing the year with modest returns.

In 2004, small companies again outperformed larger ones, value outperformed growth, and real estate investment trusts (REITs) and energy were the top performing industry groups. The stock market also had a decided preference for dividends over capital gains in 2004, and income stocks also did very well. For reference, here's the stock market and industry group scorecard for 2004:

Earnings growth in 2004 was very strong with the earnings for the S&P 500 expected to increase by over 19% by the time fourth quarter earnings are reported. However, investors found no shortage of things to fret about in 2004 including higher interest rates, the likelihood that economic growth would begin to slow, Iraq, a weak dollar, and an election that looked too close to call. As a result, valuations were pushed lower in 2004. The P/E ratio on the S&P 500 Index started the year at 20.0X and ended 2004 at 18.3X, which is about the middle of its historic range.

In the fixed income market, the differential narrowed significantly between short-term and long-term interest rates. The Federal Reserve slowly increased the Federal Funds rate at a pace that didn't match the acceleration in the inflation rate in 2004. As a result, inflation-adjusted yields on bonds remained negative on Treasury Bills and were relatively unattractive on longer bonds. One result of this was that some foreign investors took their money somewhere else, putting pressure on the dollar.

With the election over, there's no longer any good reason to keep short-term interest rates below the inflation rate, so we wouldn't be surprised to see interest rates move up a bit in 2005. However, there's a fine line between letting interest rates go up enough to stabilize the dollar and provide bond investors with a real return without killing the housing market at the same time, and how this will play out remains to be seen. We remain cautious and would continue to emphasize quality, liquidity, and shorter maturities in the bond market.

As we enter 2005, we also enter the wrong part of the Presidential election cycle. Investors know that good things tend to happen to the economy in the years leading up to the election and any excesses are fixed afterward, and it doesn't seem to matter which party is in power.

Not only are returns in the equity market usually lower after elections, but the risk of losing money in stocks doubles.

As these tables indicate, the chances are good that returns in the stock may be below average in 2005 as earnings growth is likely to slow a bit with the economy, and it's hard to see valuations increasing if we're right about interest rates. However, it's also worth keeping in mind that the chances are still 5 in 8 that stock market returns will be positive, and it probably won't take much to beat bonds again this year.

It should also be noted that proposals to make the 15% tax on dividends and capital gains permanent and to allow Social Security participants to invest a portion of their retirement are steps in the right direction for those of us that would like to see more money come off the sidelines and into the equity market. In the meantime, we're remaining well diversified and focusing on companies that appear attractively valued and well positioned in 2005.

Paul Woods is the CEO of Odyssey Advisors, where he manages investments for high net-worth individuals, families and institutions. He can be reached at 310.568.4700.

Information has been obtained from sources believed to be reliable however Odyssey Advisors LLC does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this material and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

Create a Better Future.

by Natalie Pace, CEO & Founder, NataliePace.com

Three Easy Tips for Successful Investing

This recipe works for real estate, bonds, classic cars and even Lladro!

What do television and donuts have in common? Sugar and sugar for your brain. If you want to create wealth and a better life, you have to begin with nutrition. Taco salad may sound bland compared to chocolate soufflé, but if you spice up that salad with olives, cheese and chipotle salad dressing, nutritious becomes delicious. It takes about 10 minutes longer to prepare than the TV dinner, and will add years of healthy living to your life. The same principle is true for your wealth. Ignore it and it dies. Put a little energy into it and it flourishes.

SoÉ before you start cooking, turn off the tele, toss out your gossip magazines, and jump up off that couch, potato! Reject the malicious hypnotism of negative media images. Reject the cotton candy thrill of obsessing with the lifestyles of the rich and famous. Embrace, educate and empower yourself. You are the star of your life. Shine. NataliePace.com is your place to network with other like-minded individuals who promote wisdom and abundance in their lives, and understand that prosperity allows one to be charitable, to positively impact our world and to promote the higher good of those less fortunate.

And now for the meat and potatoes of successful investing.

I want to share a story from my past with you that illustrates the importance of taking money into your own hands. Right after my divorce, a certified financial planner, who was recommended by my bank, tried to convince me that diversifying my little nest egg into mutual funds anchored by AOL, Global Crossing, Japan, and Enron was an incredibly sound investment opportunity. This was in August of 2000, before the market's collapse and the slew of bankruptcies. I wanted to believe that the broker knew what he was talking about, however, common sense was kicking me in the gut. (For the complete story, go to my article entitled, "From Divorced and Desperate to Dream Come True.") What I learned and applied in 2000 meant that instead of going belly-up (on the CFP's advice), I went from a $20,000 real estate profit to owning the majority share of a multi-million dollar corporation.

Did you ever hear Warren Buffett talk about the billions he made by listening to his broker? No, he invests in things that he knows and understands. So, if your broker is Warren Buffett Jr., you're in luck. Otherwise, the best way to get better than average returns lies in your hands.

Is fear of sleep-inducing graphs and statistics keeping you poor? There is a better way. In fact, you are probably sidelining one of the key ingredients of successful investingÑvaluing information that you already have. Read on to learn why employing your brain, heart and gut add up to money in the bank. And remember, what you don't know could kill your retirement, like it did in 2000. More than ever, with employers turning to self-directed 401ks over pension plans, it pays to get smart about your money.

Three Easy Tips for Successful Investing:

1. Start with what you know and love.
2. Pick the leader in the sector (in real estate it's location, location, location!)
3. Buy low; sell high.

Think of these three tips like a recipe. You need all of the ingredients, and if you take the steps out of order, you could end up with a brick (sinks like a stone) rather than a cake (rises light and fluffy to Cloud 9). Since we all want to vacation on Cloud 9 before we're 90, sharpen your intellect and prepare to get cooking.

Step One: Start With What You Know and Love:
Warren Buffett, one of the most successful investors of all time, is notorious for NOT investing in NASDAQ. He didn't understand or care about technology enough to compete with his buddy Bill Gates (and conversely, Bill Gates is heavy in tech, and light in insurance--Buffett's field). A novice is a sitting pigeon for the master. Imagine stepping out on the tennis court with Roger Federer (winner of four Grand Slam tennis titles) and expecting to even see a ball coming at you. Very unlikely. If you don't know the first thing about a company or its product, and you're not excited enough to live, eat and breathe it to get savvy, why step on the court and humiliate yourself with a devastating loss?

A lot of people say that they don't know anything about investing, which is completely untrue. The information you have as a consumer is extremely valuable, AND it comes out three months or more BEFORE the analysts see it on the earnings reports. My father, who considers himself a novice investor at best, commented to me that Kmart was in trouble months before it declared bankruptcy, while the company was still getting an average buy rating from analysts. How did he know? He went into the local Kmart store to buy something. The store didn't have it, and the employees didn't know when it would come in. In fact, one of the employees said that the shipments were on Thursdays, but that they hardly ever ended up receiving what they'd ordered. My dad was advised to go down the street and buy it at Wal-Mart (which he did). If a company is doing enough right to get you to come into their store and buy their product, chances are they have something going on. If you're choosing their product over the competition, you probably have a pretty keen understanding of why.

On a personal note, I've been wondering for two years now if satellite radio is really the next big thing. This Christmas, a friend of mine got one as a gift. He's not rich and he lives in a city with HUNDREDS of radio stations, but $13.00 a month is worth it to him to have radio without commercials in the city, and a huge bonus over the white noise of road trips. (It saved him during a long, snowy road trip with his mother over Christmas.) I'm sold on the product AND on the low monthly subscription rate, which is why Sirius is the Stock Pick of this month.

HOWEVER, just because you love the product or the store doesn't mean the stock is a good price or that they will continue to beat out the competition in the future. Don't leave out the other essential ingredients!

Step Two: Pick the Leader in the Sector:
Knowing your investment is the first step, but if you stop there, you're going to trip up. You have to determine whether or not it will be valuable to buyers in the future. Real estate was such a great performer for the last few years that homeowners have been using equity as an ATM machine. Does that mean that real estate will continue to perform as strong in the coming years? Stocks were huge in the late 1990s, but, outside of a strong 2003, have been rocky at best in this decade. Does that mean that stocks, particularly NASDAQ, are still a rotten investment? Bonds were one of the worst performing assets in 2004. Should you dump them?

If you're not a master at research and analysis, your best bet is to get professional help. You might think that picking a winner is a crapshoot, but professionals do have a strong upper hand here. And novices who disregard this, and stubbornly choose to believe that whatever is making headlines today will continue to make headlines tomorrow might try to remember the name of the lead actor from the first season of ER. (Anthony Edwards. He was nominated for FOUR Emmys as Lead Actor in a Drama Series.)

Picking the leader of the sector is something that you will learn OVER TIME. Think of this part of the recipe as Hollandaise sauce that you purchase pre-made until you've really mastered the technique. For additional tips on how to start educating yourself and become your own financial guru, see the end of this article.

Who Can You Trust to Give You Great Advice?
BrokersÑreal estate, mortgage, stock and bond--are not geniuses: they are salesmen. If you want to buy real estate, consult a professional real estate INVESTOR or investment professional, who has been doing it longer than 15 years and has seen a few downturns in the market. If you're interested in a company, do a Google search and see what the professional money managers are saying about it. You might also want to consider signing up for a newsletter or for a magazine that has a great record for picking winners. Same for bonds (PIMCO.com is a great resource on bonds.) NataliePace.com devotes many articles penned by pros to educate you on all sectors of the markets. Print out past archives and keep reading and taking seminars!

Don't rely on analyst recommendations either. Analysts are very smart people, but if you buy when they say buy and sell when they say sell, you're more likely to lose than gain. It's a matter of supply and demand. When the analysts say BUY, everybody buys and bids the price up. When the analysts say SELL, everybody sells and the price goes down significantly. Analysts drive the markets. If you want to benefit from the herd mentality, you've got to get there first and be willing to do the opposite of what everyone else is doing. Sell when everyone wants to buy (and you've already locked in your profits), and buy when everyone loses faith (if you believe the investment has great potential).

How can you pick a winner or dump a loser before a professional analyst makes the hit? There are professionals who do just that. The top performing newsletters for the last five years are Corcoran's Chronicle and Investment Quality Trends (on a risk adjusted basis), according to Mark Hulbert of Hulbert's Financial Digest. The stock picks in these newsletters have posted 277.5% and 115.2% cumulative gains respectively over the past five years (ending 12.31.04) versus a -10.4% performance by the S&P500.

For more information on Corcoran's Chronicle, call 904.693.0355.

For more information on Investment Quality Trends, go to: http://www.iqtrends.com/html/prospective.html

For more information on the top newsletters, according to Hulbert's Financial Digest, go to MarketWatch.com and click on newsletters.

NataliePace.com is not tracked by Hulbert's, but we've featured more than a few home runs, including Taser at $4 (before it split three times, posting over 2,000% gains), Overstock at $10.50 (now trading in the $60s), Opsware at $1.80 (originally featured in December 2002) and Genentech, before it split, at $37.81 (gains are over 180%). We've also had a few losers, like Bennett Environmental (although Bennett posted strong gains before last year's woes). No portfolio has 100% winners. If it does, start your own newsletter and make millions.

Once you pick the leader in a sector that you understand, the final determination is simply whether or not you're buying at a good price or paying through the nose.

Step Three: Buy Low; Sell High. Easy to Say, Hard to Do:
Buying low and selling high is completely against human nature. Buying low means that when everyone is crying Apocalypse, you're crying Opportunity. After Martha Stewart's release from prison in spring of 2005, she could face more hardship, get fired from her own company and have Mark Burnett (creator/producer of Survivor and The Apprentice) cancel her new show. Krispy Kreme Donuts could go out of business because of the U.S. diet-inspired boycott on carbs. Call me crazy, but I believe in Martha and Krispy, especially at share prices not seen for years.

Selling high means that you're leaving the party at midnight (sober), while all the punch drunks are screaming that the party is going till dawn, and you're going to Miss Out, Man!! If you just hang out a little while longer, imagine how much more fun you will have! No one has a crystal ball, but it is a good idea to evaluate your investments at least twice a year, and to monitor any big news (earnings reports, product launches, exploding or imploding sales, increased competition). The last one to leave the party usually ends up with a bad hang-over. Selling is the ONLY way to lock in your profits.

Taser International is a good example of a company that threw an amazing party over the last two years, but it may be time to head on home (sell) NOW, BEFORE February 8th. Last month, Taser warned that they will not meet earnings targets due to slower sales and increased competition. There is an SEC inquiry into the safety of the Taser gun and into some sales that were booked last year. Insiders have cashed out over $124 million over the past twelve months, concentrated in the three principals at the company (who are all related). The bailouts occurred BEFORE the SEC inquiry and the sales warning were announced. This company has a market capitalization of $1.025 billion and annual sales of just $59.20 million. (Can you say overvalued?) All of these add up to red flags to SELL NOW, before Taser reports year-end earnings on 2.8.04 (with the lower sales statistics that they've already warned about).

The part of the equation that many people miss is the SELL HIGH part. One person was advised NOT TO SELL Sun Microsystems at $95 because he was in a high tax bracket. The accountant advised that it was a much better idea to transfer the stock into a trust for the children. This man would have netted $600,000 after taxes from his sale. Sun Microsystems is now at $5.00, losing over 90% of its value. It's hard to justify not selling, when he could have cashed out, paid the taxes AND given each of three children $200,000 each THREE YEARS AGO (or made another investment).

Mastering Step Two: Water Your Money Tree: Your Brain.
Start Educating Yourself. Investments are like a mosaic. The more tiles you uncover, the clearer the picture. Each month, NataliePace.com features a Stock Report Card that lines up the numbers for you. When you line up sales, income, price to earnings ratio, debt, insider trading, recent news on the products and executive team, price and price history, there is always a clear-cut winner. We locate the numbers and stick them in an easy-to-read chart. If you don't know price to earnings ratio from hieroglyphics, tune in next month, when we explain some of these concepts. In the meantime, it's not difficult to understand sales and income and price. Start now with what you do understand, and accept that you will continue to gain knowledge as you keep moving forward.

If you plunge your head in the sand and rely solely on your broker, or on a hot tip, or any other ONE tile, don't be surprised if you get buried. Reading the ups and down of the stock price is not educating yourself. It's obsessing, and may lead to an ulcer.

Another way to educate yourself is to come into the NataliePace.com chat room to share your information or ask your questions. It is anonymous. No question is too silly, and no one knows who is asking it any way. (Check the Calendar section frequently for upcoming opportunities.) The next chat is scheduled for Wednesday, February 9^th, 2005 at 8:45 a.m. PST.

Use these three tips as your foundation for successful investing, but keep learning. There are many more things to understand about investing, including portfolio diversification, asset allocation, tax laws, and more. However, don't let the extra information get your head in a spin to the point that you don't remember the basics. Always go back to the simple formula. If your potential investment passes all three criteria, odds are in your favor to start getting rich the easy wayÑby following your heart and adding your brain.

Note: Tax laws are important to understand. Stock that is sold within 12 months is taxed at a higher rate than stock that is held longer than one year. After Bush's tax reform, the tax burden is not as big a consideration as it has been in the past.

Please note: NataliePace.com does not act or operate like a broker. We are a media and information center. This article is intended to educate and inform individual investors, and, thus, to give investors a competitive edge in their personal decision-making. The publicly traded companies mentioned in this article are not intended to be buy or sell recommendations. ALWAYS do your research and/or consult an experienced, reputable financial professional before buying or selling any stock.

Natalie Wynne

Founder and CEO, NataliePace.com

www.NataliePace.com

866.NataliePace.com

If you would like to book an investing seminar, please contact NataliePace.com at 866.476.7442. We can do the 90-minute seminar by phone or in-person, depending upon where you are. Cost for you and nine friends is less than dinner (with drinks), at just $30 per person. Gain all year on one meal. (YesÉ Gains are great!)

Ask NataliePace.com:

Starting an Investment Club Feels Like Death by Spam!

Dear NataliePace.com,

I am trying to put an Investment Club together and even though I am energized by the prospect, I am feeling paralyzed as well. Since I started my research online, I have been "spammed" to death by financial "experts". I so appreciate the honesty in your story (From Desperate and Divorced to Dream Come True). I believe many women feel paralyzed by the prospect of gaining an understanding of the market because of the overwhelming amount of information available. It's confusing and makes me suspicious.

Susan T.

Dear Susan,

It is important to distinguish between financial professionals and those of us who are covering financial news, information and education as media professionals.  The main difference is that I, and my media colleagues, do not make ANY money on the companies that you invest in.  My bread and butter comes in when I can accurately and ethically report on companies, trends, sectors and financial news.  More importantly, however, your members need to learn how to spot scams, how to know when the broker is selling a company because he is getting a higher commission. A great, trusted, CFP is invaluable, but brokersÑall brokers, stock, bond, mortgage and real estate--are salesmen. Some are more ethical than others, but all have incentives and PRESSURE to sell. Last month, we published an Investor Alert from the NASD about brokers who were convincing homeowners to bet their home equity on the stock market

Susan, in the beginning of any new venture, everything feels like work.  (Remember the first time you tried driving?)  Just trust that you can take it easy and steady, that your investment club will be a great place to learn without taking on too much risk and that this time next year, you will be a lot more confident and secure in your investment decisions.  As you ASK QUESTIONS and listen closely to the answers, you will start knowing who to trust and who to discard.

--
Natalie Pace, founder & CEO

CEO of the Year:

By Natalie Pace, Editor in Chief and founder, NataliePace.com

Q&A with David Neeleman, CEO and Chairman of JetBlue Airways, the best flying experience going- DirecTV at every brand new leather seat, new jets and the best on-time performance. How do they do it with such low fares?

Leave it to a father of nine (Yes 9!!) kids to bring low-cost luxury and profitability to flying, while at the same time appealing to stay-at-home parents/employees who want or need the extra income. While United Airlines has lost $9.7 billion since 2000, JetBlue has posted 15 consecutive quarters of profitability. Even Congress has taken note, citing low-cost airlines as the "future" of the industry. "Stay-at-home" reservation clerks love the enthusiasm of the company's executives, as well as taking breaks with their kids. Pilots and passengers alike enjoy on-time performance (due to computerized flight preparations). And it turns out that those "out-of-the-way" airports, like Long Beach, California, which have deplaning on both ends of the aircraft and less wait in the security lines, make for a far more enjoyable preflight experience.

Daniel McKenzie, Smith Barney Citigroup's research analyst, wrote recently that, "With the cyclical majors too sick to compete effectively, low-cost carriers likely will win incremental revenue opportunities." Just how sick are the big, network carriers? United Airlines reported a $1.6 billion loss for 2004. Delta's loss was $5.2 billion last year. In total, with US Airways and Alaska Airlines yet to report, last year's losses for the legacy carriers total $8.6 billion (according to the Associated Press). By contrast, JetBlue, even with the challenge of a 40% increase in the cost of fuel, squeezed out a net income of $2.4 million in the 4^th quarter of 2004.

How does JetBlue combine luxury items, like new aircraft, large leather seats and separate entertainment/TV for each passenger, with low fares and top-notch customer service? The network carrier CEOs like to blame it on lower salaries, but in truth, David Neeleman completely redefined the operating model for airlines, incorporating sweeping reforms that were long overdue, while still providing employees with a competitive salary and benefits.

1. Work-at-home reservation clerks. Tonya, a former teacher, says, ""I had a baby, and so I stopped teaching. I was looking for something to do on the side. With JetBlue, we get to work from home. It worked out great." According to Tonya, quite a few stay-at-home parents have opted to work for JetBlue. Fewer overheads for the company with more flexibility for employees are a win/win for both.
2. Team Work: According to Bryan Baldwin, Coordinator Corporate Communications for JetBlue Airways, "During major holidays we roll out Holiday Helper, a program where crewmembers from finance and corporate support centers volunteer time at airports to assist with operations."
3. Profit sharing. Profit sharing goes directly into the employees'Ñall employeesÑself-directed 401K's and crewmembers can invest it however they desire.
4. Fun and Incentives. JetBlue has an annual "Name the Plane" contest that it is open to all employees. The winner and his/her guest get a trip to France to tour the Toulouse factory and "pick up" the plane.  
5. Computerized planning. JetBlue was the first airline to arm their pilots with computers instead of piles of paper, including electronic manuals (saving printing and distribution costs), archives of FAA required Flight Records, Planning/Performance and Weight/Balance computations, pilot scheduling and most importantly for on-time performance, electronic Load Planning. According to Al Spain, JetBlue Senior VP Operations, "Our pilots have all decision data for all runways and all potential intersections on those runways before they ever leave the gate area.  In this situation, if the control tower needs to change the departure runway or departure point on any given runway, most carriers' flights will then have to wait for "new data" to be generated from their Load Planning Department and have that data transmitted to the aircraft.  While they are doing this, we have already bypassed them and have taken off."
   

If you ask us, it's still nothing but JetBlue skies. Meet NataliePace.com's courageous and successful CEO of the Year: David Neeleman, CEO and Chairman of JetBlue Airways (NASDAQ: JBLU), who has brought common sense reform and posted profits in an industry that is drowning in red ink.

Q&A with David Neeleman by Natalie Pace, CEO & founder, NataliePace.com

NataliePace.com--In 2004, for the third consecutive year, JetBlue was rated "Best Domestic Airline" at Conde Nast Traveler's 2004 Readers' Choice Awards. JetBlue was also rated runner-up for "Best Domestic Airline" at Travel & Leisure magazine's 2004 World's Best Awards, the third consecutive year receiving the award. Congratulations. It appears that your goal of attracting loyal customers has been achievedÉ

David Neeleman--The competition is not all that great. We could become the best airline in the industry and still not be that great.

What is wrong with domestic airlines?

I think the industry started being great. In the beginning, flying was a pleasure and a journey. It became, post-regulation, that people were more concerned with cost than the customer service issue.

Interesting that a "low-cost carrier" carries some of the best perks. Big, leather seats with DirecTV at each one and XM Satellite Radio, starting mid-yearÉ

We looked at what we wanted to see in an airline. I had the pleasure of not working for another airline. I was not mired down with the airline business. I thought outside the box. You have to be able to see the box. Why not put leather seats in every seat? The TVs cost a dollar a flight. People will pay for that. It was a radical application of common sense.

You've had 15 straight quarters of profitability during a time when network carriers are posting epic losses, two are in bankruptcy and the others are fighting hard to renegotiate labor contracts to stay afloat. Even ATA, another low cost carrier, had to seek bankruptcy protection.

This is a tough time in our industry. Fuel prices are high. This situation is not sustainable. It will become survival of the fittest if it continues at this level for much longer.

Congressman John Mica, the chairman of the House Aviation Sub-Committee, said that "low cost carriers are the way of the future." He also warned that, "You can't have government underwriting losing operations," pointing out that the five major carriers lost billions last year, while lost cost carriers managed to make a billion.

It's somewhere in between. A couple of low-cost carriers will go out of business before the network guys go.

Are you predicting liquidation as opposed to just restructuring?

The rate they are losing money is unprecedented in the industry.

Let's talk about labor, staff pay, benefits, loyalty of employees and your ability to attract staff. Dave Siegel, the former President and CEO of US Airways, said, "Our employees are victims of the difficult reality that employees at other companies are willing to work more hours for less pay, less benefits and better work rules." It's not just about the pay, is it? JetBlue also allows reservation clerks to work from their homes, right? I would think that would attract a lot of stay-at-home momsÉ

Dave Siegel likes to blame everyone. Our pay is better than U.S. Airways. It's an atmosphere where everyone pulls together. I created a style. We have a great starting pay, regular pay, and lots of profit sharing and stock purchase programs. Everyone works together for success. That's a huge misnomer that we pay people less. We pay our people well.

Is JetBlue more family-friendly than other airlines?

We pay well. We treat them well. They stay with us longer. They are competent. Reservationists have one of the toughest jobs in the company. How do you make it so they love their job? Let them stay home. That way you get lower turnover and higher quality people.

I spoke with one of your reservation clerks. She spoke of you as if she knew you personally, saying, "The CEO and CFO are both very enthusiastic, exciting people. I've never been with a company where the executives were so enthusiastic about their product. All of the people who work here are enthusiastic as well." How do you create that atmosphere when so many of your employees work out of their home?

They go through a great training time. They are with us for over a month. That is where we get them off on the right foot. The reservation clerks are the best at reading all of the communication that we send them. They are up to speed on the competition. We have an Internet site. They have four hours where they come and meet with supervisors each month. In that small group setting, they can voice whatever they want to say. We don't just throw them in their homes and leave them there. There is interaction.

Is another cost-saving advantage having just one model of jet to maintain?

We'll have two. That's where we'll stop. The 2^nd one allows us to access a lot more customers. It certainly helps our product. Our machinists can work on two aircraft types. Pilots are the only people who can't work on both. It's part of the model of being efficient, and keeping costs low.

You are quite a risk-taker. You were the first to figure out that passengers would bring their own food, to promote out-of-the-way or unpopular airports, like Long Beach and JFK, and to eliminate the overnight stays. What's in store for the future? Do you have plans to continue to expand? Are you ordering new jets?

Our expansion is going full steam ahead. 22 planes this year. 56 airplanes over the next 24 months. There are opportunities as airlines continue to implode.

JetBlue was added to the American Express Membership Rewards last monthÉ

We're real excited about that. Our customers are wanting to do that kind of stuff. They love flying on JetBlue. Our crewmembers do a tremendous job.

The numbers indicate that you are doing a lot right. JetBlue still has the highest load factor, which in November 2004 was 83.8%. Your completion factor was 99.9%. On-time performance 87.4%. Compared to Southwest's load factor of 65.5%.

Yeah. We have the highest in the industry.

How does Southwest's investment in ATA (at $117M) affect JetBlue?

Nah, we don't serve those markets.

JetBlue has had 15^th consecutive quarters of profitability, but margins are declining. While the seven network carriers lost over $8.6 billion last year, low-cost carriers had a 68% decline in profit margin, which appears to be born more by JetBlue than Southwest. Why did your profit decline and Southwest's increase this year, when JetBlue has much higher load factors. What gives and what is your plan to increase profits in 2005?

They are only profitable because they got their fuel hedges in place. All of their profitability came from hedging. Their profit margins in the last quarter was the first time that they were higher because of their hedging activity. We'll be more aggressive in the future.

Your investors are cashing out. December saw a lot of insider trading. George

Soros cashed in $24 million. Quantum cashed in $14 million. It doesn't appear that management has joined the consensus, yet, but is this a sign that insiders have doubt about the future of JetBlue?

They did some distributions in securities, but I don't know about it. They have about $400-500 million worth of stock. It's a small percentage of what he [Soros] owned.

In reading your biography, there is one thing that stands out. Nine Children!!

Family is important to us. My wife was disappointed because she wanted ten kids. It puts things in perspective. Kids areÉ when you go home from a hard day of work, and you see your family, it centers you and makes you focus on the right things.

Being bi-coastal, I can tell you that it's easy to focus on the joy of flying when you're on a JetBlue flight, sinking into your leather seat, enjoying a great salad or sushi and flipping through television stations on a screen that you can see without craning your neck around the passenger in front of you. (And why is it that the person with the biggest head ALWAYS gets the seat in front of you!!) The airline industry is going through the worst times it's ever seen, but we're still betting on the leader and innovators, JetBlue Airways, a company that wins with its staff, with its customers and with investors alike.

You can read an archived article on JetBlue and the airline industry.

Mudslides and Market Slides-Two Ways to Lose Your Home.

Question and Answer with the NASD's Peter Chandler, Associate Director.

You may consider yourself safe from the mudslides in Southern California, but is your home at risk for another disaster? Due to a record number of people betting their home equity on the stock market, the NASD (National Association of Securities Dealers) has issued an Investor Alert. This HIGH RISK investment could result in the LOSS OF YOUR HOME.

According to the NASD, record numbers of homeowners have taken out new mortgages, refinanced, or obtained line-of-credits secured by their homes for the specific purpose of investing in securities. The hope is that the investment will not only pay the mortgage, but also generate additional income. Unfortunately, it does not always work out that way. Investors who bet the ranch could lose it.

The Wednesday NataliePace.com WWW chat on Jan. 19th may have been the most important online chat of the year, as NataliePace.com subscribers asked questions of NASD Associate Director Pete Chandler for information on how to protect themselves and where to address their concerns.

Question: I am curious about the pros and cons of taking equity and investing in the stock market..

Pete: Please review NASD's Alert.

Have you heard of MortgageFreeUSA.com?  This site recommends using HELOC to pay down your mortgage in chunks, saying you'll save thousands on interest...  Any thoughts?

Pete: As with any financial recommendation, you should go beyond promotional information and read the fine print, including any disclosure documents related to the service.  Do a search to learn as much about a given investment strategy as possible before speaking to a sales representative, so you will at least know the right questions to ask. Also, be direct: ask the sales rep to show and tell you precisely how this strategy will save you moneyÑand what the risks are.

Does the NASD field complaints for the mortgage brokers or just securities brokers?  Where can I find out if mortgagefreeusa.com has had any complaints filed against them?

Pete: NASD has jurisdiction over securities firms and their registered securities personnel, which probably doesn't include many mortgage brokers. Try the Better Business Bureau, which tracks complaints against businesses of all types.

http://www.bbb.org/

Biotech Investing:

by James D. McCamant, editor-at-large, Medical Technology Stock Letter!

The Biggest Investment Opportunity Over the Next 30 Years. Excerpt from Biotech Investing: Every Investor's Guide.

The following is an edited excerpt from Biotech Investing: Every Investor's Guide by James D. McCamant, editor-at-large, Medical Technology Stock Letter, published by Perseus Publishing, 2002.

"There is a great amount of wisdom in this book that can be applied to all successful investing, not just in the biotechnology sector. If, however, you are looking to capitalize on a segment of the stock market, which is poised for enormous growth (as Baby Boomers retire, people live longer and DNA-based treatments proliferate), Biotech Investing is a must-read. The book informs you of the ins and outs of this unique sector that are essential for maximizing your potential for profits." Natalie Pace, founder and editor in chief, NataliePace.com

As you can see from reading this excerpt from Biotech Investing, there is a lot of information about biotechnology companies and the professionals who report on them in the book's pages that will help you make much more prudent investment choices.To order your copy of Biotech Investing for less than $20, click on the underlined title.

Excerpt from Biotech Investing: Every Investor's Guide by James D. McCamant

"Over the next thirty years, I believe the biggest investment opportunities will be in biotechnology growth stocks. In addition to their fundamental appeals, they're also relatively immune to economic cycles, their core businesses are patent-protected, and they're poised to take advantage of favorable demographics over the next thirty to forty years that will increase demand for their products and services." James D. McCamant, editor at large, Medical Technology Stock Letter

Six Rules for Biotech Investing
I have six rules that I use as touchstones for any investing decision. Taken as a group, they make up an investing philosophy that's particularly well suited for investing in biotechnology. Properly applied, they help cut through the many traps that the biotechnology sector lays for the individual investor.

Rule 1 - Focus on Long-Term Results
Over the next thirty years, I believe the biggest investment opportunities will be in biotechnology growth stocks. In addition to their fundamental appeals, they're also relatively immune to economic cycles, their core businesses are patent-protected, and they're poised to take advantage of favorable demographics over the next thirty to forty years that will increase demand for their products and services.

All that being said, as growth stocks, biotech companies are the furthest thing imaginable from utility stocks. They don't generate steady quarter-to-quarter returns. In the short run, their prices are volatile to the point of being unpredictable.

The key to mitigating the perils of biotech growth stocks is to look past the day-to-day price swings and focus on long-term results. There are two compelling arguments for this approach. The first is that short-term price swings in biotechnology are often the result of the markets behaving emotionally rather than rationally. In the short run, even if the direction of price changes is correct, the magnitude is often exaggerated as a result of the sector's tendency to overreact to the news generated by scientists, analysts and journalists.

Over time, however, the markets show an uncanny tendency to correct for these overreactions - for example, consider the case of EntreMed, whose stock rose a modest $4 or so across the eighteen months spanning from the day before the New York Times story broke toward the end of 2000 [a story which caused the stock to trade as high as $85 the next day]. While the short-term investor would have been elated and then beaten down by the stock's rise and fall, the longer-term investor would have ignored the wild good chase along the way and focused on the modest return at the end of the ride. The investor taking the short-term view might trust the price information provided by an emotional market and be left utterly confused. The investor taking a longer view might see the workings of a more rational market that eventually returned to fair value.

The second argument for taking the long view in growth stocks is historical. For various lengthy stretches of time across the past fifty years, growth stocks have outperformed common stocks. Over time, the average annual rate of return generated by growth stocks can yield stunning results. Through the magic of compounding, the typical 15% long-term growth rate of a drug company (a good proxy for a mature biotech) will turn $10,0000 into $662,0000 over a thirty-year span.

Rule 2 - Invest Rationally, Not Emotionally: Base Decisions on Company Value, Not Fleeting Market Perceptions
In any sector, the classic growth stock investor approach is to research a company, develop a story for why it's going to succeed, invest when its stock is undervalued, and hold it until the stock price is in line with earnings projections or the underlying story changes. This formula applies in biotech as well, but with a few variations.

Short-run pricing in the biotechnology sector is often emotionally driven, both pessimistically and optimistically. During bullish climates, overvaluations of well-run biotech companies can prevent growth investors from buying in for long periods of time. In indifferent or bear markets, undervalued biotech companies may provide growth investors with instant points of entry, but they may also not respond to improving fundamentals for considerable lengths of time. Stock prices can lag behind perceived company valuations for months or even years, trading in narrow ranges until the price moves in tandem with or in anticipation of some event such as a drug approval, important clinical trial results, or the emergence of a favorable corporate partnership, triggering a rapid recovery from long-standing lags in value. The waits to buy in at a good price and for stocks to realize their potential can be very frustrating. Sadly, I have seen many investors give up on stocks just before they move. On the bright side, some of my most successful investments have resulted from buying more of a stock after it has failed to respond quickly to its underlying company's continued progress.

Rule 3 - Buy Rationally, Not Emotionally: If You Believe in a Company, Investing During a Negative Climate May Be the Least Risky Time to Buy
The combination of buying into stocks when they're undervalued and focusing on the long term is the key to success in earning superior returns through growth stock investing. Taking these principles to their extreme in the biotech sector, where short-run prices sometimes fluctuate broadly, leads to a surprising, counterintuitive conclusion. Sometimes the least risky time to invest in a company is when the markets are punishing its stock.

As a sector, biotechnology has more than its share of the academics' version of risk (stock price volatility), but it carries far less fundamental risk. Although there are some inherent business risks unique to biotechnology (the chance that patents won't be approved or drugs won't work in clinical trials, for example), over the years, few biotechnology companies have gone out of business. Certainly, stocks have dropped sharply in the wake of bad news, but many have recovered. The companies whose stocks do not rebound from bad news are often purchased by other biotech companies, thereby salvaging some investor equity. The high survival rate among biotech companies can be attributed largely to the relative lack of competition between products (as a result of patents), as well as the large amount of capital required for drug development, which creates a formidable barrier to entry. These factors afford companies reservoirs of residual value even if the promises of key products never come to fruition.

Amgen, the most successful biotech stock to date, illustrates the difference between stock price risk and company risk. The company began with initial funding from a group of venture capitalists at $4 a share in 1980. When it went public in June 1093, Amgen opened at $18 a share. But late in 1984, despite having five potential drugs in development and a partnership with Abbott Labs to develop DNA probes as diagnostics, Amgen's stock floundered, falling as low as $3.75 per share.

The Medical Technology Stock Letter finally recommended Amgen in April 1985 at $5.375 per share, and since that time, this well-managed company has ridden out the short-term emotions of the market to far exceed our expectations for the stock. An investor purchasing one share of Amgen during its IPO would today own forty-eight Amgen shares.

Rule 4 - Be Patient: Composure Can Increase Returns
One element that attracted me to biotechnology was my conviction that biotech companies react to shifts in investor psychology even more than technology stocks do. The price swings that result from these psychological reactions create excellent opportunities for the prepared individual investor, who often can exploit them more easily than even experienced money managers can. This is because most institutional investors are judged on quarterly performance, an occupational hazard that makes them reluctant to buy even obviously cheap stocks until after they've begun advancing in price. In fact, many buy-side analysts and institutional investors will wait until a stock has doubled in price before making a move. This hesitancy provides a window of opportunity for the individual investor who's willing to buy in and wait a while before the stock price shifts favorably. The individual investor can then enjoy the double benefit of garnering the return the buy-siders miss at the outset and the rapid price movement that often follows when institutional investors finally decide it's safe to jump into the fray.

Another built-in advantage of patience is that it provides a measure of indifference toward irrelevant day-to-day price fluctuations. As long as the fundamentals remain in place, the individual investor doesn't need to constantly track the marketÑa major advantage in composure over the ever-vigilant institutional investor. Watching and evaluating every nuance brought by each price fluctuation exposes the buy-side analyst and the institutional investor to the perils of fear and greed. It's one of the reasons that stockbrokers tend to be relatively unsuccessful managing their own accounts. The pressure builds, doubt sets in and they overtrade. It's a minor tragedy of time horizons and expectations combining to weaken investing resolve, one that the individual investor with a little patience has a good chance of avoiding.

Rule 5 - Sell Rationally, Not Emotionally: Don't Wait for the Top Price (Sell When the Market Overvalues the Company)
For many investors, the most difficult part of managing a stock portfolio lies in knowing when to sell. While I pride myself on my ability to buy quality growth stocks when they're out of favor, I almost always agonize over the sell decision. The well-known mantra of the growth stock investor (that is: sell when your reason for buying has disappeared) easily applies to stocks in decline, but the volatile biotech sector sometimes provides a more difficult test for the seller's discipline. Stocks sometimes explode upward.

In biotechnology, the individual investor is occasionally tested by a stock that makes an excessive move up. If it's particularly rapid, it's likely the sign of a moment of market irrationality, and the stock should be sold. For an avid investor, selling at this time may be particularly unpalatable - there may be significant tax consequences, not to mention the nagging doubt that some of the gains will be missed. After all, the only way to identify market highs is to view them in hindsight.

Difficult as it may be, the disciplined investor sells in a hysterically rising market. For a dramatic source of inspiration, one need look back no further than February and March 2000, when most biotech stocks, fueled in part by excitement over genomics, reached crazily high valuation levels, far beyond anything I had anticipated. Unfortunately, I was not immune to their allure: for much of the year, I balanced the call to remain in the market against the call to sell by unloading only a portion of my holdings with each improbably new advance.

For the truly aggressive growth stock investor caught in the excitement of a rapidly rising market, there is something to be said for selling part of one's position on the way up, and risking the downturn with the rest. Some investors have had success in selling half of a position after the stock doubles. They find that after they have sold half, the following sell decisions are less emotional and easier to make. For me, it works well to ask if I would be willing to buy the stock at the current price. If the answer is no, I start by selling 20% of what I own. I will then sell more if the stock continues to rise.

The need for diversification can also help to force the individual investor to scale out of a position. When a large stock position begins to make a large move, it will soon be too large a part of an investor's total portfolio, making it easier to sell a portion even as the price continues to climb. Often the stock will then correct, and, if it turns out to be a big correction, the investor then has the money to buy back in.

Rule 6 - Dare To Be Contrarian: if You're Doing What's Popular at the Time, Worry
This is the catch-all rule in my investing philosophy, and it applies broadly in biotechnology. As I hope I've shown, in this sectorÑwhere the scientists aren't always experts, the analysts and journalists have occasional conflicts of interest--the mass of investors is jumpy because most companies don't report earnings, and the markets frequently fail to distinguish between stock price risk and company risk - it pays to be contrarian. The contrarian investor may have to apply a little patience and exert some discipline when buying and selling, but the rewards have been (and I believe will continue to be) there for the taking.

To check out the Medical Technology Stock Letter, the investment newsletter that Mr. McCamant founded, please go to www.bioinvest.com.

BRAG! The Art of Tooting Your Own Horn Without Blowing It.

by Peggy Klaus, Communication and Leadership Coach.

Learn Twelve Tips For Mastering The Art Of Promoting Your Business Without Turning People Off.

.Peggy Klaus .Photo Credit: Lisa Keating

When You Are The Company
Promoting a business takes on a whole new meaning when you become an entrepreneur. In effect, YOU are the company. Effective promotion has less to do with the amount of dollars spent on expensive marketing campaigns and everything to do with how well you personally communicate your story to others wherever you go. You need to be ready at a moments notice to pitch a prospective client or investor, talk to a journalist, and spread the word about your company to family, friends or even the neighbor down the street. Your livelihood and future depend on how good you become at self-promotion. This requires learning to tell your story in an engaging and memorable manner that sets you apart from the crowd.

What's So Good About You?
Effective self-promotion is based on having a clear sense of who you are and what you have already accomplished, as well as your future goals. In short, be ready for the inevitable question, "What's so good about you?" To help you prepare a strategic answer, I have developed a questionnaire called "Take-12." This assessment tool asks you to think about your life: where you have been, what you are doing now, what you have to offer, and what makes you memorable.

It's not necessary to go through the "Take-12" in a particular order. You can start anywhere and skip around. As you move through the questions, however, you'll likely think of things you might have overlooked when answering earlier ones. Don't rush! Take enough time to provide very specific responses.

Take-12 Questionnaire

1. What would you and others say are five of your personality pluses?
2. What are the ten most interesting things you have done or that have happened to you?
3. What do you do for a living and how did you end up doing it?
4. What do you like/love about your current career?
5. How do you use your skills and talents in your work life, and what projects are you working on right now that best showcase them?
6. What career successes are you most proud of having accomplished (from current and past situations)?
7. What new skills have you learned in the last year?
8. What obstacles have you overcome to get where you are today, both professionally and personally, and what essential lessons have you learned from some of your mistakes?
9. What training/education have you completed and what did you gain from those experiences?
10. What professional organizations are you associated with and in what waysÑ member, board, treasurer, or the like?
11. How do you spend your time outside of work, including hobbies, interests, sports, family, and volunteer activities?
12. In what ways are you making a difference in people's lives?

Creating Your Bragologue
Now that you've thoughtfully completed the "Take-12," you are ready to create a Bragologue. Ranging from a thirty-second "elevator pitch" to a three-minute dialogue, Bragologues convey information about you in a conversational, story-like fashion that's designed to elicit interest, excitement and admiration. Review your responses to the questionnaire, then start to weave your answers into a colorful story that portrays you as the effective, interesting and charming person you really are! You will often be using your Bragologue on the flyÑwhether delivering it to prospective clients or chatting with people at a holiday partyÑso make sure you are comfortable piecing it together in various ways and lengths appropriate for different audiences. Practicing your presentation a little each day will create remarkable results. Armed with a polished and well-rehearsed Bragologue, you will be prepared to promote yourself and your company in any situation. And for the best outcome, always keep in mind the following:

Twelve Tooting Tips For Mastering The Art Of Bragging
¥ Be your best, authentic self.
¥ Think about to whom you are tooting.
¥ Say it with meaningful and entertaining stories.
¥ Keep it short and simple.
¥ Talk with me, not at me.
¥ Be able to back up what you say.
¥ Know when to toot.
¥ Turn small talk into big talk.
¥ Keep your Bragologues current and fresh.
¥ Be ready at a moment's notice.
¥ Have a sense of humor.
¥ Use it all: your eyes, your ears, your head, and your heart.

Communication and leadership coach Peggy Klaus is president of Klaus and Associates and the author of BRAG! The Art of Tooting Your Own Horn Without Blowing It (Warner Books). To find out more about all of the workshops and programs available from Klaus and Associates, visit www.klausact.com.

Sweet Stocks: Craving Bargains?

by Natalie Pace, editor in chief, NataliePace.com

Krispy Kreme, Martha Stewart Omnimedia and Sirius Satellite Radio are on the menu! Stock Report Card.

2004 and 2005 are years that we are calling "day-trader's paradise," where the annual trend is lackluster gains (with a statistically significant potential of a negative return this year) and profits are found in short windows of market volatility. Normally, January is our favorite profit-taking month--the month of the largest gains of the year--when buying should be kept to a minimum. (The best buys are found in September, during the Back To School Stock Sales.) However, with the elections in Iraq keeping everyone on their seat about terrorism this month, the markets have performed dismally and there are a few interesting companies with attractive share prices. Monitor stocks very closely between now and April.

Selling: Because this is a day-trader's paradise, where stocks have proven time and again over the past twelve months to advance and pullback, this year the theme is take your profits immediately. Advanced Micro Devices share price run up of over 80% from October to December, and the pullback in January, is a prime example of how quickly gains can disappear. (The tax hit of a short-term gain is much less prohibitive than in past years, though it is a higher percentage than if you hold the stock for more than a year.) There are a few sectors that should continue to perform very well this year on outstanding earnings, including metals, energy, technology and biotechnology. It's your call on whether you want to take your profits early on these sectors, or keep the chips on the table. Remember that profit taking allows you to buy back in at a more attractive price, should it occur. Additionally, there is a whole lot of risk in the market right now, and it is almost impossible for even a great company to swim against a market downturn.

Full disclosure: I have listed the companies that I own under the column "NP OWNS?"

Note: These are not buy/sell recommendations. Always consult a professional before buying or selling stock. NataliePace.com is a media company, reporting on the news, information and education you need to make better investment choices.

Please note: NataliePace.com does not act or operate like a broker. We are a media and information center. This article is intended to educate and inform individual investors, and, thus, to give investors a competitive edge in their personal decision-making. The publicly traded companies mentioned in this article are not intended to be buy or sell recommendations. ALWAYS do your research and/or consult an experienced, reputable financial professional before buying or selling any stock.

VISION: To build a global community of investors through a worldwide website, seminars, radio, television and print partners.
GOAL: To provide high-quality, first-run, ethical financial news, information and education, presented in an entertaining format, across all media (television, radio, print and online).
MISSION: To provide the news, information and education investors need to make better choices and to make investing as much fun as shopping.
PHILOSOPHY: Member Mosaic. Piecing together a more complete picture of the publicly traded company, one tile at a time, by valuing firsthand consumer experience, conducting evaluations of the executive team and lining up the numbers of the publicly-traded company with its competitors in a Stock Report Card.
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NOTICE: NataliePace.com is NOT a stock brokerage service, and does not operate or act as one.