(Source: Associated Press) Note: Sears Holding Co., combination of Sears and Kmart and the 3rd biggest retailer, has not released same-store sales. 2. U.S.
Automakers "The U.S. has lost all of our competitive advantage in the auto industry," according to Gary Becker. Becker's Nobel-Laureate winning colleague, Myron Scholes (co-originator of the Black-Scholes options pricing model) notes that the "U.S. has older technology, while the newer companies have the advantage in newer technology." 3. Auto
Parts Manufacturers 4. Real
Estate. Few of the real estate CEOs thought that rising interest rates would slow the incredible power of easy cash liquidity and immigration that have fueled the real estate boom, along with record low interest rates. But one Nobel-prize winning economist let a little air out of the real estate bubble. "As interest rates rise, the natural tendency would be [for real estate] to fall in value," Gary Becker admitted. Mr. Becker didn't think that a decline in real estate values posed a major risk to the U.S. economy, but did think it might have consequences in the construction sector. Steel has tripled in cost. Cement has doubled. Copper is at an all-time high. Building costs have skyrocketed, up to 30% more today than eighteen months ago. Subcontractors are harder to secure. And Sam Zell, the Chairman of Equity Group Investments, just SOLD a bunch of buildings in the San Francisco Bay area. The question is, "Should you buy real estate now, while land value is the most expensive it has ever been in many areas of the country, interest rates are rising and building costs are at least a third more expensive than last year?" Steve Dietrich, president of FRG and a guest lecturer at the Anderson Graduate School of Business, UCLA "would not want to have to sell a home over the next few years," and advises new buyers to be careful in their selection and in the amount of debt that they take on.
With savings in U.S. households down to 1%, it's hard to imagine where the extra money for property taxes, increased mortgage payments and staggering remodeling costs is going to come from. Don't expect miracles from the Fed with regard to interest rates. The Fed is "on a glide path to what they call normal, which is between 3.5 and 4 percent," according to Kelley Wright, the managing editor of Investment Quality Trends. 5. Long
Distance
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Score Big with Your Dream Business with Free Help From Veteran Execs..
Have you been dreaming of starting your own business and are looking for help and support in the process? Or do you already have your own business and would like some guidance on how to expand and further develop the company? Well, help is at hand and it's FREE! SCORE, the Resource Partner of the U.S. Small Business Administration at www.score.org, is dedicated to entrepreneurial education and the formation, growth and success of small businesses nationwide. SCORE, "Counselors to America's Small Business", is an excellent source of free and confidential small business advice to help you build your businessÑfrom idea to start-up to success. With close to 400 offices in the US and territories, SCORE is available in your own backyard. Email counseling is also available for unusual specialties and for added convenience. SCORE has a network of over 10,500 volunteers who are experienced, retired and working entrepreneurs and corporate managers/executives. These executives provide free business counseling and advice as a public service and as a way to give back to their communities. What a benefit to you, the growing entrepreneur! Recently I was interviewed for SCORE's opt-in e-newsletter on how to become a successful entrepreneur:
Experts
featured in SCORE's Expert Answers
give how-to advice and provide inspiration for business success.
A: I was the second daughter in a Chinese family, so there were very modest expectations for my future. But I came to understand my inner mission and understood that I was connected to something greater. Knowing my mission and trusting in a higher power kept me going when I came to the United States, even though I didn't have any large support group waiting for me.
Q:
Before one can start using what you have to get what you want,
don't you first need to determine what you have? Q:
Your philosophy can certainly help someone considering starting
a small business. How about those who are already entrepreneurs?
If you have been waiting for the right time to start your new business, to expand an existing one or if you are struggling with challenges in your company, you can tap into this wonderful resource. I'm grateful SCORE is around. I took advantage of their services when I started my first company many years ago. Now I'm on the national board of directors for SCORE Foundation, doing what I can to give back so that other people can benefit and realize their dreams too. Maybe you will be one of those people? Marilyn Tam is an influential corporate leader, speaker, consultant, author, philanthropist and social activist. www.HowToUseWhatYouveGot.com Marilyn Tam's book, How to Use What You've Got to Get What You Want, receives an average 5-star rating from Amazon.com customers. In her book, Ms. Tam talks about how to discover your own inner North Star, and how to use it to navigate your efforts to achieve maximum personal success. The hardcover is just $14.00 on Amazon.com. Check it out!
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How The Millionaire Next Door Can Be You. An excerpt from the book , Inspiration To Realization
Ms. Woods has over 30 years of investment management experience. Managing assets for clients as diverse as Norton Simon and the Federal Reserve Pension Fund. She is a life time member of N.E.W., The Network for Empowering Women Entrepreneurs, the CFA Institute, the Los Angeles Society of Financial Analysts, NAFE and, a past president of The Los Angeles Association of Investment Women, as well as an advisor and contributing writer to NataliePace.com, a leading women's investment network. To a young person, a million dollars sounds like a lot of money. To someone approaching retirement, it may not seem like enough to last the rest of her lifetime. Most well-known evangelists in the church of making money will tell you the best way to get rich is to save and invest 10% to 15% of your income by automatically deducting it from your salary or other earnings before you begin to pay your bills. These people are charismatic, enthusiastic, and oftentimes knowledgeable. They are also trying to sell you something. The product is usually a book, a CD, a "proven" method or a mind-set that will help you achieve your goal of becoming a millionaire. These people know if they can motivate you to save that amount, simple compound interest will act in your favor and eventually make you a millionaire. If you are inspired to actually save and invest that much, whatever the cost of the motivation, it is probably well worth it. Everyone has it in them to become a millionaire. It does not matter who your parents were or how they treated you, where you went to school, what you look like, or where you live. Those things might help you get to a million dollars faster, but in the end all that matters is how you and others value what you do, what form that value takes, and how you choose to make it grow. I have been working since I was 12 years old. I am older now, and I choose to work. I don't have to. I was a mini-entrepreneur and sold greeting cards and stationery door-to-door when the world was a safer place for such activity. My family was constantly moving from place to place. As a result, I attended 18 different grammar schools, but I learned a valuable lesson--to adapt to changing circumstances. This is also essential to becoming a millionaire. Asset allocation among different investment choices is the most important factor that determines both your risk and return. A set of studies by Ibbotson and Sinquefield details historical returns among the major asset classes since 1926, and each year they publish a yearbook updating the data. These studies show stocks of smaller companies have higher returns than larger companies at 12.5% versus 10.5%, intermediate term bonds have higher returns and less risk than 20-year bonds, by a marginal amount, and Treasury Bills had the lowest return with the least amount of risk. The longer you have to save and invest, the greater the potential for becoming a millionaire. The main reason the returns were higher for certain asset classes involved greater risk measured either by price change or risk of loss. Also, how soon you plan to retire, go to college or buy a house makes a difference. If you have a long time horizon you can weather a downturn in stocks and afford to keep invested for the recovery. So, the younger you are the more stocks you can have in your portfolio. As you age and accumulate more wealth you have more to lose, so bonds become a greater part of your investments. This lessens the risk of your portfolio and also lessens the return. Benjamin Franklin said, "If a man empties his purse into his head no one can take it away from him. An investment in knowledge always pays the best interest." I believe that goes for women as well. So learning to adapt and becoming knowledgeable or the expert in any given field will aid you in your journey to be a millionaire. This does not always mean getting the highest degree in school, as sometimes degrees and certifications become barriers to entry or union cards to lessen competition. Use your energy to learn what you need to know and where to find that information. If you are an entrepreneur, you want to sell a product or perform a service that solves a problem, provides benefit, and is in demand at a price that will create a profit. A good Internet site is www.Entrepreneur.com .For women in particular, www.newentrepreneurs.com .is good, to network, cross-refer, and build your business. If you want to start an investment club in order to exchange ideas and pool your resources with others you can go to www.NataliePace.com and get an investment club kit and sign up for a financial news ezine. The Internet is an invaluable resource for getting an on-line education, researching companies and industries you want to work for, or invest in, as well as giving you access to hundreds of articles written by experts in various professions. One misconception many people have is: if they don't have a lot of money they cannot save money, let alone invest. Not so. If you are unable to make the maximum IRA or 401K contribution or don't have thousands of dollars to invest in stocks or make a down payment on a home, you still can become the millionaire you dream about by saving and investing regularly. Whether that means dumping your spare change into a jar, or contributing to a low cost fund purchase plan, or getting an interest only, or no down payment mortgage--doing it, and getting in the habit, can make the difference in whether you succeed in becoming a millionaire or not. If you want to be a millionaire, you need to ask yourself some questions. How much sleep do you want to get at night while getting there? Do you think you invest to win, or do you want to invest not to lose? There is a significant difference in how you achieve your goal depending on your answer to that question. Warren Buffet says, "Invest in what you know." He followed his own advice and avoided the stock market technology bubble in the late 90s. Since then, Buffet's Berkshire Hathaway holdings have gone from 73% stocks and 21% bonds in 1997 to only 26% stocks, 35% bonds and 30% operating companies. An alternate path to becoming a millionaire is to sell a company you have grown to another party (preferably not Warren Buffett because he does not pay retail). Small business owners are starting companies now more than ever before. The virtual office, outsourcing of human resources, payroll and bookkeeping can give someone an 8-foot commute instead of an hour. More and more small companies have low cost advantages that allow them to compete with much larger competitors. The person who wants to sleep tight every night can become a millionaire by paying off their home mortgage, keeping a zero balance on their credit cards, living modestly and putting even more income into things like dividend paying stocks that provide growing income and a tax advantage. The dividends are taxed at 15% these days. To find out more information about these kinds of stocks, Value Line has a listing of "147 Stocks That Increased Their Dividends Every Year For the Past 10 Years." When I managed money for Norton Simon, and his wife Jennifer Jones, the movie star wanted to buy a Rolls Royce. He said "no" and bought her a Cadillac station wagon. It was cheaper and the back of the car was big enough to transport his priceless paintings. Mr. Simon took advantage of the price appreciation of the art by donating it to his museum and then took a hefty tax write off. Millionaires don't need to buy expensive cars, even though they can afford it. They know they are wealthy and don't care to impress anyone else because they don't have to. They have more than a million dollars, and so can you. Meri Anne Beck-Woods is the Chairman and CFO of Odyssey Advisors, where she manages investments for high net-worth individuals, families and institutions. She can be reached at 310.568.4700. Please join Meri Anne Beck-Woods in the NataliePace.com chat room on Wednesday, May 11, 2005 at 8:45 a.m. PST where she will answer your questions one-on-one! The NataliePace.com chat room is another benefit of subscription. Join Now!
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.
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Bears Eat Everything In Sight, Except Oil and Raw Materials.
By Paul Woods, President & CEO of Odyssey Advisors, LLC In the first quarter of 2005, the stock market showed a continuation of the one step forward, one step back pattern that began a year ago. Stock market leadership, such as it is, has also changed during this period. From the low in September 2002 into the first quarter of 2004, this bull market looked like a replay of the last one with technology and biotech leading the way. However, investors began to notice increasing energy and raw materials prices, and leadership changed in early 2004. Although this bull market was broad-based in its early stages, it has evolved into a market that rewards an investment in energy stocks and some raw materials and not much else. In the first quarter of 2005, larger companies generally outperformed smaller ones, and value appears to have slightly outperformed growth. Energy and utilities were the top performing industry groups while anything with tech in its industry description brought up the rear. For reference, here's the stock market and industry group scorecard for the first quarter of 2005:
In the most recent quarter, earnings again came in ahead of expectations and estimates have generally been revised upward a bit for 2005. The combination of higher earnings and lower stock prices means that equity market valuations again came under pressure, and the main culprit appeared to be higher interest rates driven by inflation concerns. During the quarter, valuations for the S&P 500 declined by about a point to just over 17X, which is still in the middle of the historic range. In the fixed income market, the differential between short-term and long-term interest rates narrowed further. The Federal Reserve continued to increase the Federal Funds rate at a modest pace designed to keep Alan Greenspan in the news as long as possible. The result is that short-term interest rates are still below the reported inflation rate, and the reported inflation rate still looks suspiciously low.
During the quarter, Alan Greenspan casually mentioned that pricing power appeared to be returning to the economy. Anyone who remembered the financial markets in the 1980s knew what THAT meant, and bonds sold off immediately. While we don't expect the same inflationary spiral since energy is now a smaller percentage of our expenditures, the implication is that inflation and interest rates are probably going to rise a bit more in the near term. We remain cautious and would continue to emphasize quality, liquidity, and shorter maturities in the bond market. Overall, we expect economic growth to slow a bit this year. Most economic growth is still tied to consumer spending, and higher energy prices act as a tax increase by giving consumers less money to spend on other items. Although there's no credible forecast of a recession anytime soon, slowing economic growth should also produce a slowdown in corporate profit growth. While stocks may have a below-average year, bonds aren't setting the bar very high and we still believe there's a good chance that stocks will outperform bonds in 2005. We're having a hard time getting too worried about higher energy prices, since this will finally do what government programs and billions wasted in subsidies were unable to accomplish. Some alternative technologies for meeting our energy needs will become viable and all types of marginal energy sources will probably be brought into production. We're frankly surprised that Saudi Arabia has permitted oil prices to rise to a level that makes alternative energy sources viable, and wouldn't be surprised if the Saudis have an attack of common sense one of these days and ramp up production to meet demand. 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.
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Survival Tips for Today's Challenging Investments. 1. Paddle out on a good board! Check the financials, in particular the increase or decrease in earnings per share and revenue. Don't rely on reports of whether a company has beaten earnings expectations. (They might have been expected to lose money and/or market share.) A quick look at the financials of Toyota Motor Company and Honda versus General Motors tells you BEFORE the next earnings call which companies are in the money, and which are struggling. In real estate, when adding up your price points and conducting due diligence, be sure to add at least 30% to the construction costs and construction time, based upon a spike in metals and timber prices and increased demand for subcontractors. Also, factor in rising interest rates if you are getting a variable loan. 2. Swim sideways across riptides. Swimming frantically for shore against a riptide is the worst thing to do. Likewise, selling in a panic on a piece of bad news is portfolio suicide. A lot of lives and money have been lost by panicking. Patience and profits are better P words. 3. Go under water and wait it out when the wave crashes on your head. Even the most skilled surfer has a few wipe-outs, so don't worry if one or two companies in your portfolio head south for awhile on bad news. Trust your investment strategy, just as a great surfer trusts her abilities on the waves. Rely on fundamentals, not hot tips or headlines. However, if all your stocks are doing miserably, then your research criteria might be diseased! (Conversely, if all your stocks have been winners in the last three years, you're ready to write a bookÉ) If you need some stock market strategies that work, contact Investment Quality Trends at www.IQTrends.com or the Buyback Letter, at www.BuybackLetter.com. Both of these stock newsletters performed in the top 5 newsletters in the U.S. for the past five years. Also, check the NataliePace.com calendar section frequently for upcoming chats and money conferences with the most successful money managers, analysts and business leaders in the U.S. . NataliePace.com chats with money managers, financial advisors, CEOs and analysts are free to subscribers. Join Now!
The markets (bonds, stocks and real estate) are predicted to have only slight gains, with a lot of volatility, this year, which enables stock day-traders to eke out profits by "trading around the core." (Trading around the core refers to buying a favorite stock on bad news, and selling on good, usually for smaller, incremental returns.) Make sure you factor in the short-term gains tax consequences before engaging in this strategy. Buy into sound companies with good products and management, at a good price. Don't be bullied into buying NOW before you check out the fundamentals (products, management, market share, fiscal health, P/E, share price history, etc.). Peter Lynch writes, "If you don't study any companies, you'll have the same success buying stocks as you do in a poker game if you bet without looking at your cards." If your broker is pushing you hard to do something fast, ask the hard questions. Don't get bullied into believing that fundamentals, a measured plan and strategy are less important than dollar cost averaging and auto-deposits. Ask the hard questions about your broker. If s/he bullies you every time you ask a question, you are definitely working with the wrong person. Before you pull out equity in your home to invest in the stock market, read the NASD bulletin, "Don't Bet the Ranch," in volume 1, issue 56 of the NataliePace.com archived ezines. Let's face it. If the waves are tsunamis, the best strategy isn't going to be grab a board and race into the jaws of death. It's a much better idea to practice on the two-footer first. Watch (and read up on) how the pros do it. Get to know your favorite stocks BEFORE you buy in. Play with your portfolio in a mock setting before you place your money on the line. And know that P/Es, that is the price of stocks compared to their earnings, is near a medium to high range. If you're mantra is Never Pay Retail, don't be in a hurry to buy before September. Set a sell price. Don't watch your gains drift out to sea, if the tides turn in real estate, stocks or any investment. Have enough cash on hand-- and target buy and sell prices--so that you can buy when you want to buy, sell when you're getting the best price and laugh all the way to the bank. What's the best strategy for not getting burned on investments? Slathering information all over your beautiful brain. Is the product hot? Are the company and/or its products winning awards? Are sales increasing? Is this the best company and/or real estate in its sector? Are you buying at top dollar or at a decent price? If you're confident about a stock and the buy-in price, don't wait for the rest of the world to agree with you. Catch the wave at dawn, while everyone else is sleeping. (Do, however, make sure that the information you are basing your judgment on is accurate.) Once the word gets out, let investors compete to buy your shares or your property, and drive up the selling price!
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How to escape the mutual fund trap and take charge of your own IRA investment
By David R. Fried, Editor and Publisher, The Buyback Letter Now that traditional pensions are nearly extinct and Social Security is neither a sure thing nor assured of being a substantial benefit for many people, all of us must face facts and take charge of our own retirement money. Other than tossing a dart at the various mutual fund portfolios trotted out by human resource departments across the land during open enrollment season, how should we best invest our IRA money? This question is even more important this year, since the maximum contribution for 2005 has increased to $4,000. The short answer is a self-directed IRA that invests in stocks, not mutual funds. (Ask your human resource department if that option is available to you.) I'll tell you how to do that later on, but first, let's discuss why mutual funds -- one of America's most popular investments and the principal vehicle for retirement savings and college funds -- are inherently flawed. Mutual fund investors tend to pay high taxes and high fees for an investment that invariably underperforms the S&P 500. Investors also often choose their mutual fund poorly, in part because making that choice is complicated by changing management, misleading marketing and confusing prospectuses and fee schedules. In addition, a successful fund one year tends to be a bad fund the next year, and even a fund with good returns year after year tends to have lower profits as the years pass. There are several key reasons for these problems. 1. Managers face difficulty in guiding a large mutual fund. When a fund is profitable, investors flock to it. If management doesn't cap the fund at a certain dollar amount, the manager soon faces a fund whose size inhibits its success. The fund becomes so large, and often has taken such large positions in individual stocks, that simply selling one of its stocks can make that stock's price go down, thus lowering profits. The same thing happens if management wants to buy; it's hard to get the best price. The favored stock then rises in price, once again lowering potential profits. This phenomenon also causes a corollary problem for fund managers. They cannot unload stocks quickly, and yet sometimes they are forced to do so when investors cash out of a fund and stocks must be sold to repay them. Thus, profits may suffer simply when investors leave. A manager of a large mutual fund also often has to diversify into too many stocks. While diversification is good in theory, too much diversification means that if one stock does well, it has little effect on the portfolio. In addition, management must stick to big companies' stocks because there are not enough small, growing companies to make a difference for a $2 billion mutual fund, for example. For management, this situation isn't bad, because the way the fund operator makes money is by taking a percentage of investors' money. So, the more investors, the better. But for the investors, a large, unwieldy mutual fund, on average, underperforms an index fund while charging higher management fees. For example, from 1993-1998, in the 45 biggest stock fund families, each with $2 billion or more in assets, only one outperformed the S&P 500, and that one, the Janus 20, beat it by only 2/3 of a percentage point, according to Forbes (August 1998). At the same time, these funds earned $6 billion annually for their companies, while index funds would have generated only $1.5 billion in fees. (Index funds charge lower fees, of course, because there is no active management and little need for promotion. The only time an index fund buys or sells a stock is when the index it mimics makes a change and the fund is then forced to follow the lead of the index.) So giant funds generate huge management fees for their sponsors, but give less than index-fund performance. In other words, the more money you manage, the more profit you make, but the less able you are to serve your shareholders. Smaller funds can do a little better, but not much. For example, of domestic stock funds with $25 million to $1 billion, 7 percent, or 38, beat the market from 1993 to 1998, according to Forbes. But small funds can turn to losers when they get too many investors because they then incur the same problems as big funds. Even if investment is capped to keep the fund small, it will likely continue to grow at perhaps 10 percent a year simply with successful investments, and thus it eventually becomes unwieldy. 2. Fees eat up investors' mutual fund profits. Fees can be 2 to 3 percent when added together, often creating bond-like returns with stock-size risks. Fees include the standard percentage (about 1 percent) charged by the fund, both front end and deferred loads, as well as the broker fees for each stock purchase. These fees increase with trigger-happy managers. A fee of only 1 percent can reduce an investor's final account balance by 17 percent on a 20-year investment. In addition, a prospective investor may have trouble learning what the actual fees will be due to complicated and confusing prospectuses and fee schedules. 3. Prospective investors may get misleading information about a fund. A tactic called "incubation" has become a standard way for companies to create attractive funds with high, but misleading past profits. It works like this: Fund managers use the firm's money to create several new funds that have ideal start-up conditions, to internally and quietly test various fund managers' strategies. Then they choose the best performer to bring to market. At first, these funds will not be advertised to the public, and since there are no investors other than the firm, no money will be removed. So, managers have an advantage since they don't have to deal with selling off stocks when investors leave the fund. After a short period of time, the managers typically keep only the highest performer and then market it as though it had been created under normal conditions. 4. Management driven by marketing concerns. The ploy mentioned above is only one of the problems created when management creates specialty funds to lure investors instead of creating solid funds that perform well in the long run. For many managers, the game is not about profit, but more about attracting investors, since more investors means more money for them. Even if an investor finds a fund with a quality manager, the quick-changing nature of management jobs may mean someone different manages that fund the next year. Often the new manager will sell off much of the portfolio, increasing investors' tax burden and broker fees. In addition, most managers tend to have a herd mentality. They simply follow whatever is popular with other managers at the moment. Often that is the same standard stocks in which an investor could more safely and profitably invest through an index fund or a personal stock portfolio. 5. Investors. Most investors tend to have an unerring ability to buy at fund highs and sell at fund lows. Thus, they whittle away their money by moving it around. Also, just like managers, investors typically don't follow the buy-and-hold philosophy, and thus increase the headaches for managers who must cash them out, often incurring losses in the fund because of it. One of the oldest and most successful funds is Fidelity's Magellan Fund. Had you invested $10,000 in this fund when it started in 1963, your money would have grown to more than $10 million. However, the joke at Fidelity is that if they were to have a party for all of the original investors who still had money in the fund, the party could be held in a phone booth! 6. Cash. The overwhelming majority of mutual funds always have a cash balance on hand. They keep cash to cover redemptions. Also, as money comes in from new investors or dividends, it accumulates in cash before it can be invested. The cash can amount to up to six percent of the portfolio in many cases. The cash is kept not to benefit the investors but rather to make it easier for the managers to run the fund. Since all funds, including no-load funds, have a management fee, the investor winds up paying a management fee on cash. This is ultimately a drag on performance. The
mutual fund scandal. Some fund managers broke the rules and did some old-fashioned cheating. They got caught lining their own pockets at our expense. New York's district attorney blew the whistle, proving improper trading practices that padded their wallets and those of favored clients at the expense of the other 95 million average-Joe shareholders. Their anti-investor practices included allowing illegal and improper trading in funds and overcharging certain customers. Essentially what they did was allow certain of their best customers (and in some cases, employees) to trade in and out of funds in a way that let them skim some of the profits from the funds, by "late trading" and "market timing." These fund managers showed a reckless abandon by putting their personal profits ahead of their shareholders. Fund managers have a fiduciary duty to put their investors' interests first. This was retirement and college tuition money they stole, and that made it not only shocking, but morally bankrupt. The
solution Another strategy to insure diversification would be to combine a few of our smaller portfolios, for the same benefit. For example, the combination of the 5-stock Buyback Dogs® portfolio with the 10-stock Buyback Income Index® and the 5-stock Buyback Health & Bio-Tech Portfolio® would also give you 20 different stocks with a winning record. They are all beating the S&P since inception - the Dogs by 121% (started March 1997), the Income Index by 56% (started March 1997) and the Health & Bio-Tech by 202% (started December 2001). Let me put that another way: If you had invested in our 20-Stock Buyback Index, you would have done 4 times better than the S&P 500. Can you say the same for your mutual fund? Fortunately, we can avoid the world of mutual fund scandal, liars, cheats and people with a callous disregard for your money. We don't need to do after-hours trading to achieve our successful results. We most assuredly don't time the market, and we don't bury research fees and charge you for them in hidden costs. What we do is help you make wise, reasoned, rules-based choices for your investments. Our Buyback Strategy might not be sexy, it might not attract as much attention as some others, and we might not swagger all over the financial community tooting our own horn. But we do something, so many others don't: We follow the rules. We narrow the stock-picking universe first by only considering those companies that buy back their own stocks, and then we apply a passel of other research filters, one after the other, to narrow the playing field further. What ends up in the neck of our funnel are only the best of the buyback stocks, those most likely to grow and add value without undue risk. We don't let the heart overrule the head when it comes to buying, holding or selling stocks. It is not about what's hot, what's trendy or what's going to be the next best thing. It is not about what our gut tells us to do, or a hunch passed on by a brother-in-law. It is not subject to giddy impulses as a result of a few fantastic stock buys, or driven by fear of failure from a few bad choices. It is simple, but not simplistic. It is about following rules we have set up to govern our stock selections. Beat the market with buyback stocks. That's money you can take to the bank, and money that will fuel your future. More
Information on Stock Newsletters, Index Funds and Mutual Funds What
about index funds? There are many index mutual funds, so investors can pick a favorite strategy, such as large, medium, or small companies; "value" or "growth" stocks; international stocks; or fixed income investments. Below
is a sampling of some well-known indexes and examples of funds
that mimic them. Wilshire 5000 Index: The Wilshire 5000 is often referred to as the Total Stock Market Index because it tries to track the returns of practically all publicly traded, U.S.-headquartered stocks that trade on the major exchanges. It is the largest index by market value, and the most diversified index in the world. Fidelity Spartan Total Market Index Fund (FSTMX) mimics the Wilshire 5000 Index. Dow Jones Industrial Average: At more than 100 years old, the DJIA is the oldest continuing U.S. market index, made up of 30 of the largest and most influential blue chip stocks. The DJIA is the best-known market indicator in the world, and is often referred to as "The Market." Diamonds Trust, Series 1 (DIA) tries to provide investment results that generally match the price and yield performance of the DJIA. Nasdaq: The Nasdaq Composite Index represents all the stocks that trade on the Nasdaq stock market. The Nasdaq 100 Trust Series 1 (QQQQ), is made up of the 100 largest non-financial companies on the Nasdaq stock market and is seen as a way to mimic this index. Russell 2000 Index: The Russell 2000 is used to measure the performance of U.S. small company stocks, and is the most widely quoted measure of the overall performance of the small- to mid-cap company shares. The Vanguard Small Capitalization Index Fund (NAESX) tracks this index. David Fried is the editor and publisher of The Buyback Letter (www.buybackletter.com), the only investment newsletter devoted to finding opportunities among companies that repurchase their own stock. His asset management firm -- Fried Asset Management, Inc. -- offers separate investor advisory and money management services which use the "Buyback Strategy" principles. All of his portfolios are beating the S&P 500 since inception, and the prestigious Hulbert Financial Digest ranked The Buyback Letter #3 for risk-adjusted returns among stock-picking newsletters for the five-year period ending 3/31/2005. The Buyback Letter had an annualized gain of 14.3%, vs. the Wilshire 5000 total return of -2.6%.. Subscriptions for the Standard Edition are $195.00 per year. Please join David Fried in the NataliePace.com chat room on Wednesday, May 18, 2005 at 8:45 a.m. PST where he will answer your questions one-on-one! The NataliePace.com chat room is another benefit of subscription. Join Now
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Jack Pot! A Struggling Artist Inherits His First Home - a Fixer Upper. Not knowing the first thing about loans, remodels or stocks, he turns to the Living Wealthy team to avoid squandering his inheritance on bad investments (or bad habits). Each month, NataliePace.com provides subscribers with your chance to have four seasoned financial consultants give you a personal money makeover. The Living Wealthy financial consultants are: Carista Luminare-Rosen, Ph.D., Educational Director of Inner Securities and Holistic Wealth Consultant, Stu Zimmerman, Chairman & CEO, Inner Securities and Holistic Wealth Advisor, Gregory Wendt, CFP®, Money Manager and Certified Financial Planner, and Judith Green, Mortgage and Real Estate Financial Advisor. See the end of the article for instructions on how to receive your personal money makeover. Profile
of this month's LIVING WEALTHY Candidate: Home
-$630,000 with a 30-year mortgage of $175,000 interest rate of
5.75%. One Year
Life Goal - To figure out what I want to do with my life now
that financial pressure is off Tom seeks
help, in his own words: What is the best way to proceed with my life now that I have less financial pressure? "How do I make this money work for me in the best possible way to help me create the life of my dreams?" CARISTA'S
RESPONSE: You have inherited some money that puts you in a different category of net worth. Do you feel having this increase in wealth affects your sense of self- worth? You describe yourself as historically being an artist who has struggled for money. Is it time to change this sense of your self to a more empowering self-identity that matches the new opportunities the money is offering you to explore? Perhaps consider feeling that you are a "student of wealth" learning about how to use this money as an expression of your authentic self and your deepest heart's desires. Or, consider that you are in training to become a "steward of wealth." Do you feel worthy of this money and the freedom it potentially gives you? Your sense of self-worth to receive this money will color your experience of every penny you spend. Does this inheritance offer you a greater sense of freedom to follow your heartÉ or did you inherit a legacy of beliefs from your mother how to spend it that feels limiting? What do you believe about children who inherit wealth where they do not have to work or struggle for the money? What do you believe about having this money with no -strong financial skills to guide you? Do you believe your mother left you with a blessing or a burden? It will help you to consider how these assets affect your core values before and after you inherited them. Do you have specific values that will guide you how to use the money? What do you value now that you did not value when you were an artist who was financially struggling? How has the inheritance affected your creative expression as an artist? Do you value giving yourself allowances to enjoy your inheritance whether you are investing, saving or spending it? Take some time to write down your top five values for utilizing this money as an expression of your true self. In considering these ideas, be as specific as you can. Those who dream of inheriting some wealth almost always consider it would be a blessing if it happened. Yet when it actually occurs, many people feel overwhelmed with the greater responsibility and wide spectrum of choices for allocating the funds. Even those who have some financial experience and wisdom struggle with how and what to invest in that they can trust. Spend some time on the Internet at www.Google.com and use search words like "inherited wealth" or "wealth management" to further educate yourself. Also, do the same with some online bookstores and you will find a variety of information about wealth. There are countless facets to developing prosperity consciousness that you need to simply enjoy being a student of wealthÉ.. and becoming a steward of wealth will be a natural evolution. There is so much to appreciate about this major life change that will even help your money appreciate. Your mother has given you a gift to create a new quality of inner and outer abundance. Best of Luck! P.S. Stuart Zimmerman, a Living Wealthy team advisor, wrote a great inspirational book called Inner Security and Infinite Wealth which I highly recommend to guide you to a new awareness about your relationship to money and security. It can be purchased at www.amazon.com or at www.innersecurities.com. Carista Luminare-Rosen, Ph.D., Director of Education, Inner Securities, Inc. To contact Carista directly to share comments or for a consultation, she can be reached at Carista@Innersecurities.com or visit the website www.innersecurities.com. STU'S
RESPONSE: First of all, please accept my condolences on your mother's passing. The death of a parent is usually a defining point in one's life, especially so in your case. Now you have a new sense of both freedom and responsibility based on your inheritance. You write that your deepest heart's desire is to be of service to the world at large. In doing so, you are invoking a timeless and deep spiritual self-inquiry: "What gives my life its greatest meaning?" Ask yourself this question during a spiritual practice, or in a natural setting that you find peaceful and inspirational. When you find and live the answer to this question, you will know a wealth beyond measure. So, Tom, as you embark on this journey of self-discovery with some measure of financial security, I have primarily only two words for you: AIM HIGH! I know you're only 27 years old and that you are just now exploring what to do with your life. It is reasonable to expect that no matter what field of endeavor you choose, you may begin as an apprentice or trainee. That said, AIM HIGH, even if you do wind up starting in an entry-level position. Give your self permission to dream big for many reasons: One, because it's a big world out there; two, because this is your life, not a dress rehearsal; three, because you achieve great things through big vision and passion; and, four, because you often get what you settle for, so why not "aim high?" It may also help you to explore a traditional path to your career choices. You will undoubtedly learn more about your personality, interests and talents that may inform you what directions to pursue further. Consider reading, What Color Is Your Parachute? by Richard Bolles, available at bookstores or www.amazon.com. You may also want to check out his website, www.jobhuntersbible.com for additional information. AIM HIGH,
Tom, and may your results exceed your expectation. Enjoy the journey. Stu Zimmerman, Chairman & CEO, Inner Securities. To contact Stu directly for a consultation, he can be reached at Stu@innersecurities.com or visit the website www.innersecurities.com JUDITH'S
RESPONSE: Your mother has left you two very fortunate gifts, aside from the obvious financial benefits:
At age 27, especially with your focus on art, you may not have thought about financial issues such as your credit rating. Your credit history is your "report card" to lenders, banks, landlords, and even insurance providers, to help them evaluate how you handle your finances. Credit history is primarily based on records of monthly payments on credit cards, student loans, car loans, or mortgages. While much of mainstream attention today focuses on being "debt free," that position can sabotage access to important money tools because it leaves you without the loans that give current information to the financial system. Without an active credit history, you may pay higher interest rates on loans in the future, or not even be able to qualify for some of the better mortgages. You will serve your future better if you don't pay off and cancel your credit cards, but instead use them moderately and pay faithfully. If you struggled financially in the past, your credit scores will benefit by new history that shows a regular pattern of financial responsibility. Your plan includes a dream of remodeling and expanding your mother's house. Start now to examine your options in the mortgage world, and learn how mortgage finance can make money work harder and go farther. For example, your present $175,000 mortgage, 30-year-fixed at 5.75%, has a monthly payment of $1021, before taxes and insurance. Even though you don't have much income, you have assets, and if your credit scores are good, you can qualify for a type of mortgage that guarantees a very low payment for up to five years. For example, a new loan of $400,000, under terms available today, has a payment of only $1479. Although it's more per month, it is a source for money to improve the house, and the increased payment is all mortgage interestÑdeductible against taxable income from those annuities and your writing. The current mortgage is probably still in your mother's name, and won't show up on your credit report. You might be smart to take advantage of today's favorable mortgage climate and get a new loan in your own name to help your credit picture. And while you're looking at income issues and house financing, consider what your mother paid for that house and what it's now worth. People who are new to money concepts tend to look at it as if it were a declining balance in a checkbook, and they often overlook money from assets that appreciate. If the house appreciates at 10% per year, it will be worth more than $1 million in five years, perhaps even without any improvements. You could refinance now to make a few changes to make the house more to your taste and add some liquid money to your bank account for a rainy day. Then relax, grow accustomed to these changes in your life and open your heart to meet the new love who can share your future. If you have a major remodel in mind, you may want to do it with your partner, so the house truly becomes your shared dream home. With future appreciation, and a future refinance, you should have all the money you need. If you learn to actively and consciously manage your new money, you can have all the flexibility you hope for in creating the life of your dreams. May you have
a brilliant future, creatively and financially. Judith Green, a mortgage and real estate financial advisor, specializes in problem solving for clients with more complex or non-traditional lending and credit issues. She can be reached for comments or to request a consultation at createmoney123@netzero.com. GREG'S
RESPONSE: You have
an opportunity to "re-invent" or "re-discover"
yourself and take advantage of the new financial resources to
learn more about your purpose and mission here in the world. As a financial
advisor and financial planner, I'd like to offer some "practicality"
to the equation. You are correct; it wouldn't be wise for you
to live for a very long time on the money that your mother left
you. In fact, odds are that you would eventually run out of funds
and you'd have to go back to work before long. What I am
suggesting is you find a happy medium between living on the money
and going back to work immediately. Gregory Wendt,
CFP® For more information on the Living Wealthy team, visit www.innersecurities.com or call 707-425-2360. For more information on the work of the artist featured in this month's Living Wealthy, send an email to the imagine56@earthlink.net with the words "Living wealthy: artist" in the subject line.
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Commodities Rock But Do the Manufacturer's Stock? NataliePace.com's Metal Manufacturer's Report Card by Natalie Pace, founder and CEO, NataliePace.com We're plenty pleased with the performance of our featured metals company, Rio Tinto, which continues to set new 52-week highs (for the article, see archived ezine, volume 1, issue 48). Limited supply, gargantuan demand (think India and China emerging from the 1800s and building with all the latest and greatest American technology), sound management strategies at Rio Tinto and new steel processing patents continue to impress investors. Earnings per share is up 87.4% this year over last, while revenue jumped 21%, from $9.228 billion to $11.173 billion. Rio Tinto's competitors just raised their prices, which puts RTP in a great position to increase sales on volume and/or price. Companies involved in mining and processing metals are likely to continue to reward investors in 2005, regardless of the fluctuations in the commodities markets. As Paul Woods notes, "You can outsource a router to Singapore almost overnight; but it takes years to dig a mine." Scott Hand, Chairman and CEO of Inco limited, the world's 2nd largest producer of nickel, notes that, "Supply growth is not expected to rise significantly before É 2006." That future is not quite as bright, however, in the steel manufacturers, who buy the raw materials, process them into rolled steel and other parts and distribute them to builders, auto manufacturers and homeowners. Remember the steel mill bankruptcies of 2002? Many, but not all, companies have emerged from bankruptcy and enjoyed a banner year in 2004, enough to attract institutional dollars and an "outperform the markets" rating from StockScouter. Even President George Bush praised the turnaround, noting that "steel productivity is up, profitability has returned, jobs and benefits have been saved." But what if you planned an IPO and no one wanted to go? Earle M. Jorgensen Company, a leading distributor of metal bar and tubular products in the US and Canada, announced plans to go public last October, with a target price of $14-$16 per share and twenty million shares offered. On April 15, 2005, after reducing the IPO price twice, they managed to sell 17.6 million shares for $10 each. Unfortunately, the shares have dropped even further on the public markets, down to $7.45 on April 29th, 2005. What has the pros so spooked? Net income for Metals USA during the 4th quarter of 2004 was up almost 8-fold, from $2.6 million to $20.5 million The fiscal 2nd Quarter profit for Steel Technologies more than doubled, with quarterly income of $15.4 million, from $6.9 million a year ago. Isn't the industry flush with profits? Yes, but they are still paying off or restructuring debt and profits are being squeezed on both ends - spiking raw materials costs and softening orders from the auto industry. 2004 may have been a year for the history books. Bradford T. Ray, chairman and CEO of Steel Technologies, expects prices to soften in the fiscal 3rd quarter as a result of "increased supply and a softening economic outlook." Auto production levels are down. Auto parts manufacturers are getting squeezed into bankruptcy, based upon the high prices, long delaysÑup to 16 weeksÑand reduced orders from the U.S. auto industry. You can't make profits when your customers go belly up. Analyst Joe Innace, managing director, World Steel Dynamics, predicts that: "Shortage conditions for steel will continue through March or April, then a downturn will start in May or June. So the year will end up with a moderate price decline." You might think that on the world stage, processed and rolled steel will continue to be in great demand, but the world stage was the problem with steel manufacturers and distributors in the first place. The President took decisive action back in 2000 by imposing a safeguard on foreign imports in order to provide our steel industry and its workers the opportunity to adjust. The 5-year "sunset" reviews of President Bush's Anti-dumping and Countervailing Duty (AD/CVD) orders are coming up this year. US Representative Joe Knollenberg has stated that the orders "are distorting the U.S. market for steel and unnecessarily damaging steel consuming companies in the form of decreased availability, reduced quality, delayed deliveries and higher prices." In his Resolution of February 10, 2005, Representative Knollenberg noted that five auto parts companies have recently filed for Chapter 11 bankruptcy, citing artificially high prices for steel as a significant reason. He and 38 other congressmen believe that the orders should be lifted, so that the U.S. manufacturers will be forced to compete on a level playing field with foreign steel manufacturers. The most recent review involving the steel industry, which was conducted by the International Trade Commission and the Department of Commerce, determined that revoking the order would have caused injury to the steel manufacturers, and therefore the order remained in place. If further reviews come to the same conclusion, higher U.S. manufactured steel prices could prevail until the sentiment changes at the highest levels - a mixed bag for the manufacturers, which pay too much for materials and charge too much for their customers to run a healthy business. If your memory of the 2002 steel mill crisis is so distant that you followed the institutional money on April 22, 2005, and bought into the companies listed in the Metal Manufacturing Report card, like Metals USA and Olympic Steel, you are looking at a loss today, and likely a rough road ahead. After reduced profits were reported last week, the institutional dollars fled and share prices fell. (Click on the highlighted Metal Manufacturing Report Card to compare Metals USA, against Olympic Steel, Steel Technologies, Reliance Steel, Worthington Industries and Earle M. Jorgensen Company.) There is a breakout performer in this sector - Metals USA. You have to respect C. Lourenco Goncalves, the president and CEO of Metals USA, for giving investors the heads-up that margins were going to decline BEFORE the latest earnings report revealed the challenges of the industry in black and white. In the fourth quarter of 2004, when he gave his warning, net income at Metals USA was up almost 8-fold, from $2.6 million to $20.5 million. Investors have plenty of examples of just how important the CEO and her statements are to the performance of a company (from Martha Stewart to Enron). However, as for buying into this sector on last year's good news, it's probably a better idea to bask in the glimmering mines of Rio Tinto, and wait and see what the end of the year brings for Metals USA. It's much easier to open up a new manufacturing facility than a new mine, even if the US is imposing duties domestically. Full Disclosure: As of the publishing of this article, Natalie Pace had no positions in any of the companies mentioned. 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.
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VISION: To build
a global community of investors through a worldwide website, seminars,
radio, television and print partners. NOTICE: NataliePace.com is NOT a stock brokerage service, and does not operate or act as one. |
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(Note:
These are not buy/sell recommendations. Always consult a professional
before buying or selling stock.)
Name-
Tom (not his real name)
Dear
Tom,
Dear
Tom:
Dear
Tom:
Dear
Tom,