China Surpasses U.S. Internet Usage.

by Natalie Pace, NataliePace.com CEO and founder

Sohu.com Weaves the Most Promising Asian Worldwide Web.

Chinese users spend almost two billion hours online each week (1.765 billion hours), while the U.S. audience logs on for 129 million hours per week.

Dr. Charles Zhang Ringing the Opening Bell at NASDAQ © Copyright 2006, The Nasdaq Stock Market, Inc. Reprinted with permission

On March 13, 2006, Dr. Charles Zhang, the Chairman and CEO of Sohu.com, rang the opening bell at the NASDAQ, a milestone for a Beijing-based company, but that was nothing compared to the bomb of a statistic that Dr. Zhang dropped later that morning at the Forbes.com Video Network interview. Dr. Charles Zhang reported that, according to his internal research, Chinese Internet users were over 150 million, possibly up to 200 million, and that Sohu.com, including all of their properties, was in the top five most trafficked sites IN THE WORLD. Nielsen NetRatings, which doesn't have statistics for China, reports that the U.S. had 154 million active users in January 2006, which means that China, if Dr. Zhang is correct, is at or above the U.S. in Internet users.

How could this milestone (China surpassing the U.S. in Internet users) go unreported? It turns out that it isn't that easy collecting data on over a billion people in a country as vast as China, where most people are not connected by phone lines.

The CNNIC (China Internet Network Information Center) reports that the number of active Chinese Internet users was 111 million by December 31, 2005, up from 94 million in December 2004, and growing, over the past two years, at a steady rate of 18%. However, according to Dr. Charles Zhang, the CNNIC polling is conducted by calling fixed line phones. "Young people do not use fixed line phones. They all have mobile phones," Dr. Zhang said, explaining why he believes the CNNIC is reporting lower than accurate numbers.

Even if we assume that China is still behind the U.S. in terms of users, China definitely wins in another critical area. One of the most valued metrics of Internet usage (especially for advertisers) is time online. Chinese users average 15.9 HOURS PER WEEK, while Yahoo!, the most popular Internet site in the U.S. can only get its users to stick around for less than one hour per week (216.5 minutes/month per ComScore Media Metrix). That's 1.765 billion hours per week online in China compared to 129 million hours per week online in the U.S..

What's up with all that time online? This is the first time in Chinese history that the nation has been connected. As Dr. Zhang explains, "People log onto the Internet, Sohu, because in China there was no Forbes, Reuters, Washington Post. Print media was all state-controlled and official, and the Internet filled this void." Indeed, according to the CNNIC, 67.9% of the online usage in China is spent devouring news, above search (65.7%) and email (64.7%). By contrast, only 3% of Yahoo's U.S. traffic clicks over to news (source:Alexa.com).

AND China has a lot more room to grow than the U.S. While roughly half of the U.S. population is actively using the Internet, just 11.7% of the Chinese population is plugged in currently.

Internet Users in China

Source: China Internet Network Information Center, CNNIC.net

There are 400 million cell phone users in China, with over 6.1 million mobile users connecting online (source: CNNIC). As cell phones become increasingly the connection of choice, you can expect China, which is a generation ahead of the U.S. in mobile technology, to lead the world in mobile Internet access growth. And everything hits hyperdrive over the next two years, as the country ramps up to host the summer Olympics hit Beijing in 2008.

So why is Sohu the hottest site on the worldwide web these days, when Baidu is the better known brand in the U.S.? Sohu.com is up 20% this year, while Baidu, the blazing IPO of summer, has lost 23% since January. While Sohu, Sina and Baidu all rank in the top 10 most popular global Internet sites ((above Amazon and AOL), Sohu has twice the revenue and three times the net profit of Baidu, and Sohu is the official web site for the 2008 Beijing Olympics. Additionally, Sohu was the first publicly-traded Chinese company, alongside Sina, to adopt Sarbanes-Oxley accounting standards, which speaks well of the management team of Dr. Charles Zhang (Chairman and CEO) and Carol Yu (CFO).

Is Sohu better than Baidu for your portfolio? I asked that question and more in the Forbes.com Video Network Q&A with Sohu.com Chairman and CEO, and MIT doctor of physics, Dr. Charles Zhang.

Other Articles of Interest:
You Can Do Better Than Baidu. (from NataliePace.com's 9.1.05 ezine, vol. 2, iss. 9)

Sources:
Alexa.com
China Internet Network Information Center
Comscore Media Metrix
The Milken Institute, a global economic think tank
Ministry of Information Industry, China
Nielsen Net Ratings

Meet the Chinese Yahoo, errrÉ and Google and Forbes All Rolled Into One.

by Natalie Pace, CEO, NataliePace.com.

Sohu is hot on Wall Street these days. Find out why in a Q&A with Dr. Charles Zhang, CEO and Chairman of Sohu.com, and Carol Yu, Sohu CFO.

Portions of this Q&A first appeared on the Forbes.com Video Network on 3.13.06.

Carol Yu, CFO, Sohu

Natalie: Since your site is in Chinese, let's begin by describing what Sohu does. Is

your company more of a Google, Yahoo or MySpace?

Dr. Zhang: It's combined. Sohu is like Yahoo, and we also have a search engine like Google, but it's more than that. It's also like the New York Times or Forbes -- traditional news. Sohu is a broad, comprehensive offering with 250 million page views downloads per day. Most people log onto Sohu to find out what's going on in the world.

That's incredible. And we want to remind everyone that China has 111 million active users. (source: Milken Institute)

More than that. My internal data shows that it's probably 150-200 million active users in China.

Dr. Zhang, while China, arguably, has more active Internet users than the U.S. -- Sohu's revenues last year were just $108 million, compared to Yahoo's $5.3 billion. What do you predict in terms of revenue growth going forward?

Dr. Zhang: Businesses are realizing that the Internet is such a wonderful marketing platform, so advertising will continue to grow. Small enterprises will wake up to the Internet, and see that search advertising is the way to go. It will take some time, but $100 million revenue is quite a size for a Chinese company.

Roughly a third of your revenue is coming from non-advertising sources. Describe your diversified revenue stream for our viewers, and give us an idea of why the mobile platform is so important in China at this time.

Dr. Zhang: Two-thirds [of our revenue] is advertising -- branded and search -- and both are growing nicely. We also have a subscription business.

Wireless Value Added Services, right?

Dr. Zhang: Yes, and there are 400 million mobile phone users in China. There has been an explosion of wireless revenue, which was 60% of the revenue mix. In the past, this revenue was a little volatile. Now, we've got a good mix with the advertising and we control the payment gateway because advertisers just send a check to us!

Americans worry that it is the Wild, Wild West out there in China, especially when it comes to accurate accounting. Yet, your earnings reports and press releases always stress that Sohu complies with GAAP and Sarbanes-Oxley accounting standards. Why are you so diligent in this?

Dr. Zhang: Chinese people are absorbed with learning the Western world standards. It's not the Wild West. It's a capitalist market. It's called a communist government, but it is a Confucius government. Western media should understand that the government is a very capable government.

Many major analysts say to invest in companies in Taiwan, Singapore and Hong Kong, not Beijing, because they have a much longer legacy of complying with Western style accounting. Are you leading the pack in compliance in mainland China? Is Sohu an anomaly?

Carol Yu: We're surely leading the pack. All of the U.S. listed companies were required to pass Sarbanes-Oxley in 2004. We passed it at the same time. There are only two companies in China that managed to do that.

Which two?

Carol Yu: Sina and Sohu. So it's just two, out of all Chinese companies that are listed, that are meeting the same standards as a U.S. domiciled company.

Carol, you were part of a joint venture of Arthur Andersen and the Ministry of Finance in China. You were a part of the leading delegation to open up the free markets during this historical move from communism to incentive-based compensation. Tell us about how your role in getting Chinese companies listed on U.S. markets.

Carol Yu: I'm very lucky. I started working in China about twelve years ago. I have frequent dialogs with senior government officials in China. Twelve years ago, I helped the Chinese SEC to bring the first batch of companies to become listed on the NYSE. I basically had the Chinese SEC on one side and the U.S. SEC on the other side. At that time, the Chinese did not know what GAAP was. I was the translator. We, in fact, helped the first Chinese companies get listing in the U.S. So, the dialog started then, and I continue to have frequent conversations on how to bridge the huge gap between a state-owned Chinese Communist country product and fit it into the U.S. rules and regulations.

What are your growth projections for 2006? How are you going to keep your costs in line. I'm sure your challenges for costs are less than it is here in the U.S.

Carol: Not really. The competition has heated up for talent and for good, exclusive content. But I think we are still in the high growth phase of the business. Our advertising revenue will grow about 25% in the fiscal year 2006, which is also calendar year.

Your site is in Chinese. There is a huge Chinese community here in North America, particularly Canada and the U.S.

Dr. Charles Zhang, Chairman and CEO, Sohu.

Dr. Zhang: Yes, there is user growth, but no comparison as to the user growth in China, which is now over 150 million.

Carol Yu: Without tapping that, we are already a top ten global site.

Dr. Zhang: And that is only the Sohu.com name. With all of our properties, we are in the top three in the world.

Carol Yu: Surely top five.

Dr. Zhang: 150 million is only 11% of the Chinese population. It is still a niche market in China. When it reaches 300 million, then you are going to see advertising really take off.

Then we can compare this moment in China to the 1940s in America, when free TV became the norm and connected our country. Is this device, the Internet, the first time that China has been connected nationwide?

Dr. Zhang: Yes.

Carol Yu: The Internet in China is the only media that has national reach, other than TV.

Alibaba hit the headlines last August when Yahoo bought a 40 percent stake for a billion. You recently strengthened Sohu's search engine. With all of the cash-rich U.S. Internet companies visiting Asia, surely you've been courted. Do you think you can take on Alibaba on your own or is Sohu for sale?

Big deals may get a lot of attention, but really it's the company on the ground floor that must innovate and develop technology. The Internet platform favors the company with innovative products. We believe in in-house developed technology and products. In two years, we'll be the largest Chinese language search engine in the world.

You're positioning yourself to rule by the 2008 Beijing Olympics.

Yes, and also helped by the OlympicsÉ

NataliePace.com is in the business of bringing you recipes for the rich life™, and we are proud to introduce you to one of the fastest-growing companies in the world, with one of the best reputations for complying with the accounting standards of the free world.

Click to watch the interview with Dr. Charles Zhang, SOHU CEO, and Natalie Pace, NataliePace.com CEO, on the Forbes.com Video Network!

Other Articles of Interest:
You Can Do Better Than Baidu. (from NataliePace.com's 9.1.05 ezine, vol. 2, iss. 9)

Sources:
Alexa.com
China Internet Network Information Center
Comscore Media Metrix
The Milken Institute, a global economic think tank
Ministry of Information Industry, China
Nielsen Net Ratings

Power Lunch Your Way to Profitability.

by Chellie Campbell.

How to Beat the Loneliness of the Home-based Business Person.

Chellie Campbell, Author of Zero to Zillionaire Photo credit: Mary Ann Halpin

If you are in business for yourself and working from home, you are likely to get lonely sometimes. You have no office cohorts, no company cafeteria, no water-cooler or lunchroom to hang out in and chat with folks to ease a stressful day. The evil temptations arise then: somehow the refrigerator door opens of its own accord and ice cream jumps out into your bowl as if by magic. The television or radio clicks on (by itself) and that talk show is just so interesting today, and look! It's about people in home-based businesses, too, so you convince yourself it's work-related. Or you get lost in research, i.e., surfing the webÉahhh, and where did the day go? I've been so busy! (How come I didn't make any money?)

The answer to this problem is to join a networking group. Otherwise known as "relationship marketing", networking at its best is fun, meeting good friends over a good meal and referring business to each other wherever possible. It is a support group of like-minded business people who cheer each other on to ever-greater successes. When everyone in the group is focused on finding referrals for everyone else in the group, the result is lots of business for everyone! And when you know you're going to have your networking get-together sometime soon, it's easier to stay focused on your work.

I've been a member of a networking group for eighteen years. (It's very funny when I'm at a meeting and mention this factÑsomeone always comes over to me, wide-eyed and asks, "So is it working for you?" Duh.)

The simple fact is networking works if you work it. You can't just go to one meeting every other month, give three people your business card, and wait for the phone to ring. If you're in business for yourself, you have to make the phone ring in other people's offices. The best way to make a networking group work for you is to remember these three simple principles:

1. Visibility: You've got to make a commitment of time and energyÑpick a group, a regular meeting schedule, and show up consistently. People begin to develop trust in you when you are a regular attendee of a meeting. It takes some time for this to happen, so don't quit before you've given it a full year of consistent effort. When people just show up a few times and then stop coming, I refer to them as "smash & grabbers" like the burglars who smash a window, grab all they can in a few short minutes, and then disappear. I want to do business with people I'm going to see again next Tuesday.
2. Credibility: Do a good job, honestly and with integrity. Be professional, always return phone calls, be on time, keep your word. If you can, join a committee, work on the board of directors, become an officer. That will increase your visibility and at the same time people will see you are a contributor to the success of the organization (not only am I going to see you next Tuesday, but I'm going to see you being a leaderÑbig-time credibility.) Look for the opportunity to refer business to as many other people in the group as possible. Call people and ask them what kind of clients are they looking for? What goes around comes aroundÑif someone were referring a lot of business your way, wouldn't you be on the lookout to return the favor as soon as possible?
3. Likeability: People do business with people they like. Not everyone in every group is going to be your best friend, but you can reach out, shake someone's hand, and smile. Remember this is your opportunity to greet old friends and meet new ones. The temptation will be strong to find a few buddies and sit with them every meeting. Don't do it! Pretend you are the hostess of the meeting and welcome the newcomer into your group. Do some positive affirmations and talk yourself up into good, friendly energy. Leave your complaints at home. Then I'll look forward to seeing you on Tuesday!

If you follow these instructions, you'll have so many new friendships, clients, and referrals, you won't remember what loneliness was like. And there's a side benefitÑyou'll make a lot of money, too. Just remember it's not net-sit, it's not net-eatÑit's net-work!

So, what are you doing next Tuesday?
Join Chellie at an exciting Microsoft Live Meeting next Wednesday, April 5th from 9:00-10:00 am (PT) and learn how to Laugh All the Way to the Bank:
Make More Money - And Have More Time For Fun! You're invited to this complimentary seminar, delivered via web conferencing from Microsoft Office Live Meeting. All you need is a web browser and a phone. We hope you'll join us. Follow the Microsoft link to register for the program:

Chellie Campbell is the author of Zero to Zillionaire.  She created and teaches the Financial Stress Reduction® Workshops on which her book is based in the Los Angeles area and gives programs throughout the country. Her free e-newsletter is available at www.thewealthyspirit.com.

Philanthropy: Debbie "the Liar" Allen Explains the Ant Dance:

by Natalie Pace

The Art of Empowering Future Presidents and Keeping America on Top of the World.

Debbie Allen

On Friday, March 17, 2006, the National Association of Women Business Owners, Los Angeles, honored Debbie Allen with the Trailblazer Award at a gala luncheon that filled the Beverly Hilton Hotel with nine other honorees and hundreds of colleagues and friends. (Learn more about the other nine honorees in next month's article: Sexy, Sassy and Smart.) Debbie Allen has blazed more trails and received more awards in more fields than most of us would dare to dream of, and she can still throw her leg over her head! As her friend, Suzanne De Passe said in her hilarious introduction of Debbie:

Debbie Allen added the Trailblazer Award to her two Emmy's and her Golden Globe (for her work in the hit TV series, Fame), but her greatest achievement to date, she believes, is the Debbie Allen Dance Academy, a nonprofit dance organization for boys and girls that provides a safe haven for kids to go after school. According to the DADA mission statement, the Academy prepares young dancers for a serious career in dance, musical theatre, film, and television, all the while developing the discipline, self-confidence, and creativity that every individual needs to succeed in life. That means that close to 400 children, ages 4-18, are getting the opportunity to learn dance and acting from award winners like Debbie Allen, ballet from respected troupes like the San Francisco Ballet and Dance Theatre of Harlem and hip-hop from the choreographers of Britney Spears, Janet Jackson, Michael Jackson, and Justin Timberlake!

It may sound like heaven - the perfect new stomping ground for a woman who has made a career of dancing over barriers, but finding the funding to keep an art school going in California, even one that can attract students from all over the world as DADA does, can be daunting. California is fiftieth out of all the United States in terms of its level of arts funding. Debbie Allen used her own money to launch the academy and convinced some business students to write the business plan "in exchange for chicken." The directors are always concerned about keeping the doors open and the lights on, as DADA relies upon the generosity of everyday folks like us, as well as corporations. Over 50% of DADA students are on some form of scholarship and, as is the case with most nonprofit organizations, the 501c(3) not-for-profit charitable organization is chronically underfunded. (So, please feel free to step up and join the dance!)

Debbie Allen has not only traded in the glamorous red carpets and Academy Awards of her earlier days, she has invested her own nest egg to ensure that our future leaders get what they need to succeed. What could possibly inspire her to work so hard, in a field that is a constant financial challenge? Debbie explains the ant dance and why art is so important to society, in her own words:

On May 23^rd, all of you are invited to the Debbie Allen Dance Academy festival in Culver City, California. They're going to close off the streets and show the world that Los Angeles students can dance and dream! Get more information at the Calendar Section of NataliePace.com.

Contributions to the Debbie Allen Dance Academy are tax deductible. If you'd like to help the next four-year-old on her path from the ant dance to the presidency, please click on DADA to donate online.

Follow Your Bliss; Embrace Your Gifts.

by Gary Kobat

Gary "on the wheel" of 7-time Tour de France winner Lance Armstrong

You have a calling, a destiny.  Avoid it and you will experience less.  
Follow it, flow with it and you will expand to experience more.
 
When you "follow your bliss", you allow yourself to discover who it is you really are at your core, your most essential, most energetic self; who and what was in mind when you were born.
 
Following your bliss will have you surpassing your wildest dreams, creating a unique force, a noble yet sacred pathway, inspiring yet daunting, courageous yet humbling, powerful and empowering.
 
When Joseph Campbell wrote about "following your bliss," he didn't mean hanging out on the beach with your favorite beverage. He wrote that "following your bliss" meant "no matter what" -- an entirely different concept.
 
He wrote that "following your bliss" means:

1. that there will be a lot of work to do
2. that when you get a calling to tap into who you really are that you follow that energy
3. that there will be some tough times ahead and that people might not understand you
4. that you will have to develop character traits that have been dormant inside
5. that your gifts inside will need to finally come out
6. that you might have to develop qualities that you don't think you have right now
7. that following your bliss is tough work sometimes and that your world might be standing on it's head along the way
8. that if you really follow that bliss that all hell may break loose in your life and you may be doing things that you never have thought of

Following your bliss is not for the faint of heart. It is not for cowards. You might not fit in for a while, when something in you is trying to get out.

Following your bliss means you are taking on the impulses inside yourself, giving yourself no wiggle room and making it a way of lifeÉ then noticing that your life starts to improve....
 
Joseph Campbell writes that, as your life starts to improve, "all improvement is just a release of the lies you have about yourself, about what you can't do and really is a reconnection of the infinite possibilities of who and what you can do .... ..letting the chips fall where they may."
 
It is not always glamorous work to slowly change your habits and help others change theirs, to dismantle the old and quietly build anew.

No one will give you an Academy Award or a Nobel Prize, but deep inside you will have won the respect of the hardest person to please in the world: yourself.
 
 
You see, in life, your gift is really your "bliss".

Until next month: be smart... follow your bliss and feel the shift.

A passionate life and fitness coach, world-class athlete, author, and keynote speaker, Gary Kobat works one-on-one with select individuals, customized mastermind groups, and larger goal oriented teams for lasting personal and professional change. If you are interested in joining a group or for a private consultation, email him directly at: gary@e-coach.com.

A Million Roofs: A Place With Sunshine Gets Serious About Solar.

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

Paul Woods, President & CEO Odyssey Advisors

One thing that stands out when looking at the current demand for solar panels is that most of them are found in places that don't have much sunshine. Germany and Japan account for the vast majority of the market, which says more about their governments than their climate as both countries have climates roughly equivalent to the northern border of the continental United States. Even though Germany and Japan account for almost 70% of the market for solar panels, this has more to do with their high cost of producing electricity and willingness to subsidize energy alternatives.

One consequence is that solar panels generate less electricity in these countries than they would if moved closer to the equator. To really make a dent in the demand for fossil fuels, solar has to be installed in places with more sunshine, and that day came a bit closer with recent announcements that China, Italy, and California are initiating major solar programs in 2006.

Since incentive programs in China and Italy won't impact most of us, we'll focus upon California where it took an end run around the folks that claim to be champions of the environment to keep a very ambitious solar program alive.

Protecting the Union Environment
It probably didn't escape notice that unions spent $160 million to get California's easily confused voters to block the reforms requested by a Governor they had just elected. What probably escaped notice, however, is that they also almost derailed a huge new solar program a bit earlier in the year. A bill whose goal was to install solar panels on a million roofs in the state in just over a decade died in the Assembly last August.

Those on the left side of the aisle aren't shy about telling anyone that will listen that only they can be trusted to protect the environment. However, they also know how to count contributions and when it comes to choosing sides between environmentalists and unions, it's no contest. At the last minute, the trade unions wanted a provision added that all labor for these installations would be done at prevailing trade union rates. Democrats were happy to oblige and added this provision to the final bill in the Assembly Appropriations Committee. By making this bill too expensive, it died a mostly unpublicized death in 2005 in spite of wide support from a variety of groups including the Governor.

As this was the second time this bill died of the same causes, it became obvious to everyone that, as long as our elected representatives are involved, protecting the environment will always take a back seat to protecting union wages. To get solar panels on a lot more roofs, the state needed a Plan B that kept the Assembly out of the process. Enter the California Public Utilities Commission (PUC).

Plan B and the PUC
On January 12, 2006, the PUC voted 3-1 to adopt the California Solar Initiative (CSI). The first vote allocated $2.9 billion to encourage the installation of solar systems between 2007 and 2016. The second vote allocated another $300 million in incentives for 2006, which increased the total incentives for solar to $3.2 billion.

The goal of the CSI is to install 3,000 megawatts of solar capacity by 2017. That may not sound like a lot, but in the context of the current world market, it's huge. In looking at the data from Photon International, the total world solar output probably increased to around 1,500 megawatts in 2005. As a result, the demand from California alone will be enough to TRIPLE the world market for solar if the ultimate goal of the CSI is reached.

How it Works
The goal of this plan is to install solar systems on a million homes, businesses, farms, schools, and municipal buildings by 2017. These systems will be eligible for a rebate that starts at $2.80 for each watt of capacity installed and declines to $.25 per watt in 2016. For example, a homeowner that installs a typical 2,500-watt system costing around $20,000 would receive a $7,000 rebate this year.

Although solar is still an expensive method of generating electricity, the costs are coming down steadily. However, this plan is designed to reduce the rebates by around 10% per year while solar costs are expected to decline at 6-7% per year. The result is that it makes sense for someone considering a solar system to get it installed sooner rather than later.

Paying the Tab
The money for the CSI will come from around $350 million in existing funds already earmarked for solar as well as an additional surcharge of .002 - .009 cents per kilowatt-hour for gas and electricity bills, depending upon usage. Proving the adage that no tax is ever temporary, this surcharge will replace another surcharge that resulted when California locked in long term contracts to purchase power at the top of the market during the last power crisis. The previous surcharge was set to expire in 2007, and the official line is the surcharge for CSI will have a relatively minor overall impact upon gas and electricity bills.

Other Considerations
With solar, the more sunny days, the better. As a result, the economics favor inland locations over coastal and also favor connecting solar panels to the electricity grid as opposed to using batteries or other devices to store the energy produced. Solar is typically an expensive system to install, but once installed, these last a long time and the subsequent costs are low. As a result, this makes the most sense for a home that an owner plans to keep a long time.

Finally, roof size and the amount of power you need to generate will probably dictate the type of solar cells you end up buying. With high real estate prices, homes in this state tend to be smaller. If someone needs to produce a lot of power from a relatively small roof, solar systems based upon mono-crystalline or mulit-crystalline cells are expensive but produce more power for a given surface area. If you have the luxury of more roof space, string ribbon cells manufactured by Evergreen Solar or amorphous cells in the shape of roof tiles manufactured by Energy Conversion Devices will produce the same amount of power for less money.

The Future?
As an investor, I can't help wondering about the future for electric utility companies if consumers start generating their own power. In this context, the following from News of the Weird last month http://www.newsoftheweird.com/archive/nw060101.html may be a preview of things to come.

To support its December rate-increase request, the Connecticut utility Yankee Gas Services said it needs more money because too many of its customers have lowered their bills by heeding calls to conserve energy. And a November report commissioned by the U.S. Chamber of Commerce included the proposal that Congress replenish the federal Highway Trust Fund by imposing a special tax on gas-saving hybrid cars (in that those cars consume less fuel than regular cars and therefore pay less in gasoline tax). [Connecticut Post, 12-10-05] [Boston Globe-AP, 11-26-05]

For disclosure purposes, it should be noted that Odyssey Advisors, LLC has investments in a number of solar companies.

Paul Woods is the President & CEO of Odyssey Advisors, LLC, an independent investment advisory firm specializing in equities and fixed income. He can be contacted at www.odysseyadvisors.com or 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.

Copyright © 2006 by Odyssey Advisors LLC

When a Stock is Not a Bond.

by Meri Anne Beck-Woods, Chairman & COO, Odyssey Advisors LLC; and Sonya Nangoy Krawczyk Fixed Income Research Associate

When A Stock Is Not A Bond. Fixed Income 102:

Something Sexier than a Bond: A Bond ETF

Meri Anne Beck-Woods, Chairman & COO, Odyssey Advisors LLC

Thinking about investing in the bond market, but not quite sure how to deal with the complexity of achieving a diversified bond portfolio? Well, bond ETFs may be your answer. In fact, put in "LQD" in the stock quote field of a finance website such as Yahoo! Finance and you will find yourself a real-time (or close-enough) quote of a bond ETF or a bond Exchange-Traded Fund. Buying one share of a bond ETF would immediately get you exposure to hundreds of bonds that essentially mirror the exposure, risk and return of a certain bond index. What's the catch? Read-on to get a better knowledge of the risks and rewards of a bond ETF.

Traditionally, bonds are hard to figure out. Bonds are very difficult to manage on your own due to their subtle risks and lack of liquidity and lack of price transparency, compared to your regular and oh-too-familiar stocks. Bond ETFs on the other hand behave the same as bonds, as their prices react the same way to changes in interest rates, yield spreads and yield curves. When interest rates go up bond prices go down. Better yet, by purchasing a bond ETF, you get the diversification of about 100 bonds that represent an index such as the Lehman Aggregate Bond Index or the Lehman TIPS Bond Index. Ever since its debut in July 2002, Bond ETFs have gained tremendous popularity. But don't let their names fool you. They are all part of one investment family: Barclays Global Investors.

Currently you have six options listed below that give you a broad market exposure:

Source: Barclays Global Investors
Note: Barclays manages all of the funds above with the exception of the LQD managed by Goldman Sachs & Co

Differentiating between the various iShares ETF bond vehicles will be interesting. Typically a shorter maturity bond will have less risk. The AGG will report a weighted average maturity of just short of a seven year bond and a weighted average coupon of 5.19|% with over 100 holdings.

So if it acts, feels and even sounds like a bond, is an ETF a bond or a stock? Indeed, this creature is actually a stock certificate, not a bond. Therefore, it has the benefits and risks of a stock. Similar to a stock, there is no guarantee of getting your principal back. Specifically, when you buy a United States Treasury bond (or note), the issue is an obligation of the U.S. Government and there is a government guarantee of a return of stated face value of the bond when it matures, whereas there is no such guarantee with any other kind of bond, corporate or non-treasury bond or bond ETF. Even a U.S. Government Agency bond does not have a government guarantee. There is an implication of more safety, but no guarantee.

On the other hand, you can buy and sell a bond ETF anytime during the trading day and ETF shares are priced continuously throughout the day. Other than the iShares Lehman TIPS Bond Fund that is listed on the New York Stock Exchange ("NYSE"), all other bond ETFs are listed on the American Stock Exchange ("AMEX"). Furthermore, to get really fancy, bond ETFs can be sold-short, traded on margin and hedged with options just like stocks. Too much risk you say? Don't discount them just yet! They have many beneficial features for an individual investor.

The D-word: Diversification
The real benefit of a Bond ETF is that you could own a bond portfolio that tracks a major portion of the bond market, short term, intermediate, or longer maturity giving you the diversification, liquidity and price transparency for not much money. Barclays attempts to achieve performance correlation of > 95% between its bond ETFs and its underlying index. However, if you only want to be exposed to a specific sector of the market or favor high-income or no-income bonds, then bond ETFs may not be for you. The risk metric of a stock will be significantly greater than a bond. Income and capital preservation are usually most important for an older fixed income investor. A younger person will consider total return and an ability to manipulate a bond market derivative masquerading as a fixed income instrument.

Costs involved in a bond ETF
A Bond ETF and ETFs in general are considered lower cost investment vehicles. First, you do have to pay trading commissions similar to that of stocks when you buy and sell a bond ETF. Therefore, bond ETFs are cheaper for investors that just buy and hold. Each bond ETF share range 3/28/05 - 3/28/2006 listed below

Second, there is an ongoing management fee plus expense ratio of 0.15% or 0.40%, depending on the fund, that Barclay's Global Fund Advisors receive based on a percentage of each Fund's average daily net assets. However, they are substantially lower compared to that of a major reputable bond mutual fund such as PIMCO's Total Return A (PTTAX) that has an expense ratio of 0.9%. Third, bond ETFs are more cost efficient than laddering (buying individual bonds of varying maturities) because you get instant diversification and a set duration with the purchase of one trade.

Where are my dividends?
Bond ETFs pay out interest through monthly dividends to investors (similar to bond mutual funds) and capital gains are paid out through yearly dividends.

What about taxes?
The monthly dividends are taxed as ordinary income. iShares may issue a yearly dividend that would be taxed as ordinary income if they are net short-term capital gains or as capital gains if they are long-term capital gains. From 2002 on, including 2005, the iShares Funds announced Zero Year-End Capital Gains Distributions. Taxes can adversely impact fund performance and especially in a down market where you might pay tax and incur a loss.

• Diversification in the bond market for less money
• Greater knowledge of holdings in fund (2 day lag rather than quarterly on current holdings in each EFF fund showing the top ten bonds held)
• Liquidity and price transparency
• Lower tax implications
• Lower costs

Cons:

• Risk of not getting your principal back
• Brokerage fee for buying and selling
• Not enough information about each index available to public
• No control over how and when you want your interest income

So next time when you're in the mood for something sexier than a Bond be sure to consider bond ETFs. But, just remember, a bond EFT is a stock not a bond.

Reference:
http://www.investopedia.com/articles/bonds/05/011105.asp
http://moneycentral.msn.com/content/Investing/Buyingbonds/P39109.asp
http://www.amex.com/?href=/etf/FAQ/et_etffaq.htm
iShares Bond Fund prospectus, July 1, 2005

Other articles of interest:
"The Basics of Building an ETF Portfolio" by Tracy Byrnes, TheStreet.com Contributor, 3/15/06 .
"Bond Brief: Inversion's End" by Katie Benner TheStreet.com Staff Reporter 3/8/2006.
"Girl's Guide to Bonds 2003" www.NataliePace.com by Meri Anne Beck Woods Volume 37, September 2003

Meri Anne Beck-Woods is Chairman and CFO of Odyssey Advisors LLC, an independent investment advisory firm specializing in equities and fixed income. Meri Anne is a co-author of the book, Inspiration to Realization, where her chapter "How the Millionaire Next Door Can Be You" speaks to everyone's ability to become a millionaire. She can be contacted at www.odysseyadvisors.com or 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. Copyright ©2006, Odyssey Advisors LLC

Smart Bond Investing:

The National Association of Security Dealer's Top 10 Things to Do BEFORE You Invest in Bonds or Bond Funds

You've heard it before: Asset allocation is the foundation of prudent investing. You've probably heard this before, tooÑyour portfolio should contain a mixture of stocks and bonds. This is sound advice. But do you understand the critical characteristics of bonds?

The NASD has written a Smart Bond guide (available online) to help those who already invest in bonds and mutual funds that primarily invest in bondsÑand those who are considering investingÑbetter understand this important component of a balanced portfolio. See below for the 10 Things to Do BEFORE You Invest in Bonds or Bond Funds

1. Define your objectives. Is your investment objective to have enough money for your child's college education? Is your goal to live comfortably in retirement? If so, how comfortably? You probably have multiple goals. Lay them all out and be as precise as you can. Remember: If you don't know where you're going, you'll never arrive.
   
   
2. Assess your risk profile. Different bonds and bond funds, like stocks and stock funds, carry different risk profiles. Always know the risks before you invest. It's a good idea to write them down so they are all in plain sight.
   
   
3. Do your homework. You're off to a good start if you've come this farÑbut keep going. Read books and articles about bond investing from the library. Look up information on the Web. Start following the fixed-income commentary on financial news shows and in newspapers. Familiarize yourself with bond math. And most importantly, know the right questions to ask before you buy a bond fund or individual bond. Don't buy anything you don't understand.
   
   
4. If you're considering buying a bond fund, read the prospectus closely. Pay particular attention to the parts that discuss which bonds are in the fund. For instance, not all bonds in a government bond fund are government bonds. Also, pay attention to fees. Individual bonds also have prospectuses, which derive information from a bond's indenture, a legal document that defines the agreement between bond buyer and bond seller. Ask your broker for a copy of the prospectus or indenture to read it.
   
   
5. If you're buying individual bonds, locate a firm and broker specializing in bonds. Not all firms, and not all brokers, know the bond business. Talk to a number of brokers, and find one you are satisfied with. Make sure your broker knows your objectives and risk tolerance. Check broker credentials and disciplinary history using NASD's BrokerCheck.
   
   
6. Ask your broker when, and at what price, the bond last traded. This will give you insight into the bond's liquidity (an illiquid bond may not have traded in days or even weeks) and competitiveness of the pricing offered by the firm.
   
   
7. Understand all costs associated with buying and selling a bond. Ask upfront how your brokerage firm and broker are being compensated for the transaction, including commissions, mark-ups or markdowns. If you're not buying a Treasury bond, it's a good idea to assess whether the additional return is worth the added risk.
   
   
8. Plan to reinvest your coupons. This allows the power of compounding to work on your behalf. It's a good idea to establish a "coupon account" before you start receiving coupons, so that you have a place to save the money and are not tempted to spend it. If you are buying a bond fund, you don't have to worry about thisÑthe fund does this for you.
   
   
9. Don't try to time the market. As hard as it is to time the stock market, it's even harder to time the bond market. Avoid speculating on interest rates. Decisions are too often made on where rates have been rather than where they are going. Instead, stick to the investment strategy that will best help you achieve your goals and objectives.
   
   
10. Don't reach for yield. The single biggest mistake bond investors make is reaching for yield after interest rates have declined. Don't be tempted by higher yields offered by bonds with lower credit qualities, or be focused only on gains that resulted during the prior period. Yield is one of many factors an investor should consider when buying a bond. And never forget: With higher yield comes higher risk.

The NASD web site offers a wealth of resources for the individual investor - on stocks, bonds, as well as a resource for checking up on your broker. Click over and play around! Remember, an investment in education (yours) always yields returns.

Blockbuster Sale?

by Natalie Pace.

Article and stock report card, including data on Blockbuster (BBI), NetFlix (NFLX) and Movie Gallery (MOVI).

photo credit: Courtesy of Apple

What's the easiest way to expand worldwide market share of iPods, Macs and iMusic? Expand Apple Retail. And what's the easiest way to ramp up retail? Buy an existing, beleaguered chain, like Blockbuster. At least, that's the premise of Robert X. Cringely, a popular PBS pundit, who writes, "Don't be surprised if Apple saves the day for Blockbuster Video."

Apple won't confirm or deny whether or not they are interested in rolling out more retail. However, since May of 2001, when Apple opened its first retail store, Apple products have been devoured by delighted consumers. On February 23, 2006, Apple® announced that one billion songs had been legally downloaded from iTunes®. Apple shipped 1,254,000 Macintosh® computers and 14,043,000 iPods during the first quarter of 2006, representing 20 percent growth in Macs and 207 percent growth in iPods over last year. And investors have rewarded Apple's growth by driving up the share price 550% over the last five years.

On the other hand, things couldn't be more bleak for Blockbuster. The company lost -588.10 million last year and the BBI share price has lost 80% of its value over the last five years, which has Carl Icahn, a board director and 14.68% shareholder, hopping mad. In a letter dated April 7, 2005, Mr. Icahn blamed John Antioco, Chairman and Chief Executive Officer of Blockbuster Inc., for losing $1.25B in income, for spending sprees and egregious bonuses and salaries. Icahn warned Antioco that he'd better "be sure that any offers for the company see the Ôlight of day'" and Icahn's presence on the Blockbuster board assures him a voice in the decision-making. All told, BBI looks like a prime buy-out target during the current Mergers and Acquisitions feeding frenzy.

With a market capitalization of just $419.3 million and more than 9,000 stores throughout the Americas, Europe, Asia and Australia, buying Blockbuster may be the best way for Apple to roll out more retail, especially now that iTunes is selling pod casts and downloads of TV shows. At an average price of $108,552 per prime neighborhood location (based upon the $419.3 million market capitalization, multiplied by the 2.33 debt/equity ratio), Apple could hardly make a better buy than the fading premium brand. With infamous corporate raider Icahn on the Blockbuster board, it's hard to imagine that Blockbuster isn't being pushed to sell. Of course, there are a lot of ifs in this paragraph - if a deal is even being negotiated, and if that deal goes through.

Despite the fact that neither company is talking about whether or not they are talking, there is a whole lot of very high profile trading going on. Major hedge funds have been on a buying spree of Blockbuster options and shares. Since September 2005, GLG Partners LP, England, UBS AG, HBK Investments L.P., Morgan Stanley & Co. and Citadel have all purchased large positions of options and shares of Blockbuster.

Sometimes, it just pays to draft in the wake of giants and get sucked into their momentum. Someone is smelling something, even if the scent is only wafting along the super elite on Wall Street. Of course, if these juggernaut hedge funds start backpedaling, you could get run over. In the former case, just remember that you heard it here second. (Robert X. Cringely said it first.) In the latter case, if you're invested and you wake up with an unpopular stock that no one wants to buy, rest assured that we'll stay on top of the situation to keep you informed of your (and their) options. Since hedge funds are involved and the Blockbuster annual shareholder meeting is coming up (the meeting last year was on May 11th), expect a lot of volatility, especially on the 3^rd Friday of each month, over the next few months.

Click to access the Blockbuster Report Card, which lines up the numbers of Blockbuster with competitor companies, NetFlix and Movie Gallery.

RISK LEVEL: VERY HIGH

Full Disclosure: Natalie Pace does not own shares in BBI, NetFlix or Movie Gallery.

Apple FYI: Apple Computer celebrates 30 years in business on April Fool's Day, 2006.

Please note: NataliePace.com does not act or operate like a broker. We are publish financial news. 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 consult an experienced, reputable financial professional before buying or selling any security.

Goof-Proof Investing in Stocks and Real Estate.

Learn the tricks of worry-free, outstanding, long-term 401 (k) returns, as NataliePace.com subscribers tap the wisdom of the Most Successful Blue Chip stock picker in the US, Kelley Wright.

Reprint of the NataliePace.com subscriber's only chat with Kelley Wright, the managing editor of the Investment Quality Trends newsletter, that took place on March 15^th, 2006.

Kelley Wright, Managing Editor, Investment Quality Trends Newsletter

Good morning! I'm Natalie Pace, NataliePace.com CEO. Let me introduce Mr. Kelley Wright, the #1 Blue Chip stock picker in the US, and one of the smartest money managers I know. Kelley's investment newsletter, Investment Quality Trends, was founded by the legendary Geraldine Weiss. Kelley was handpicked by Gerrie to continue her legacy and he is adhering to her strict guidelines to continue performing great on Wall Street with the least risky portfolio around.

Q: I mainly want to listen in, as I'm a bit of a novice investor. Hope that's okay!

NP: It's great for you to listen in, but I also encourage you to ask questions. If you are a novice, the more information you have the better. Consider it like you are walking up a path to wisdom and the first steps are getting your questions answered with regard to which direction to head in.

Q: Kelley, are you a fundamental investor or a technical investor?

KW: We use a combination of the two disciplines. Our criterion is a fundamental screen for quality. We then establish repetitive patters for price and yield. Pattern identification is technical.

Q: Kelley, I'm primarily a fundamental investor. I have recently been introduced to a company that uses technical investing methods. The name of the Company is _____. Have you heard of this company?

KW: No, I haven't.

NP: Did you read Mr. Wright's great article in March 2006 on how to avoid investment pornography, i.e. all of those "tricks" that are hawked in money conferences and in infomercials that are "tested, proven and/or 100% guaranteed!"? (Located it in the NataliePace.com ezine vol. 3, issue 3.)

Q: Are you using the Group Rotation, MACD and Stochastic criteria?

KW: No, we choose stocks that represent historic levels of undervalue based on their dividend yield.

NP: According to the Investment Quality Trends web site, a company will earn the I.Q. Trends designation Select Blue Chip after it has met 5 of the 6 following qualifications.

1. The dividend has been raised five times in the last twelve years.
2. It carries a Standard & Poor's Quality ranking in the "A" category.
3. It has at least 5,000,000 shares outstanding.
4. At least 80 institutional investors must hold the stock.
5. There have been at least 25 years of uninterrupted dividends.
6. The earnings have improved in at least seven of the last 12 years.

Q: Based on those criteria, it seems like you all have a long-term vision when it comes to stocks, unlike a lot of the advice I'm getting that is more towards playing the market.

KW: We buy stocks when their prices are low and their yields are high. When the prices rise to the point that the yield is no longer attractive, we sell.

NP: You should never be "playing" with your nest egg. You might take a portion of your portfolio to be more active with, but never more than you can handle and certainly never risking your retirement. Kelley, what are your thoughts on active trading?

KW: We don't trade. We hold stocks until the value has been wrung out and then we exit the position to find another undervalued opportunity. Trading is for professionals with a certain skill set.

Q: Trading is something I don't think I have the stomach for.

NP: You don't have to "trade" to make impressive returns. As an example, stocks rewarded investors, on average, 11.2% over the last twenty years, which makes stocks the best performing asset class. You don't have to get fancy to make a decent return, when you are in for the long term. The one line you will never hear from someone who is trying to sell you something is, "Trading is for professionals."

Q: Kelley, do you have any software that is available in the marketplace or do you do research the old-fashioned way of reading everything and anything you can find?

KW: We read like crazy. As for our methodology, we have a system that data mines for us.

Q: What system are you using that mines the data for you?

KW: Our systems are proprietary and were designed in-house by my IT guru.

NP: You can access Kelley's "data" by subscribing to his bi-monthly newsletter at www.IQTrends.com. Kelley's team does all of the work for you, and for less than what you might pay to own the software and do all of the extra work yourself. Kelley, do you think reading anything and everything is important for the average person? Are you discerning with the source of the information, and do you think that the average person who has a day job might experience information overload?

KW: There is an abundance of information available today. One must be able to distinguish between fact and opinion. That is a learned skill.

NP: I've also done an analysis of headlines. Oftentimes, even in Forbes, the New York Times and Wall Street Journal (the most respected financial news sources out there), the KEY DATA is found on page 16, not front and center. The headlines can be misleading, and that is what everyone is trading on.

KW: If you are trading on news, then you are late.

Q: Your system sounds a lot like my friends at _______. These traders use other companies' systems and then developed their own! They don't rely on news. With their system, they are happy to make 1-3% on their money per week!

NP: I want to advertise here that Kelley's "system" has worked AT THE TOP OF THE GAME for 20 years. The Investment Quality Trends newsletter is the NUMBER ONE risk-adjusted NEWSLETTER in the US, according to Mark Hulbert, the most respected independent tracker in the U.S.

KW: Our system identifies the undervalued/overvalued price/yields for each stock we follow. The day you buy, you already know the yield exit point. At that point, you merely wait for Mr. Market to do his thing. Our system is a bit mechanical in that way; which is good if you are an emotional investor.

NP: I'd like to remind our novice investors to beware of the sales pitch, "We're making 1-3% per week!" You'll get a lot of salespersons trying to throw up numbers and returns that sound impressive, but are not true. People will say, "So and So made 6000% gains in JUST TWO DAYS!!" but that is not indicative of the success of their product or formula for EVERY PERSON OVER TIME. In fact, So and So who won the lottery of 6000% gains in one day, might have lost 9000% the next, just like Vegas. What is indicative of GENUINE SUCCESS is if an independent organization, like Hulbert's Financial Digest, tracks the returns and measures them against the major stock market indices over time. Investment Quality Trends meets those rigorous standards and outperforms everyone on the street.

KW: If I could consistently make 1-3% per week, we wouldn't be chatting. We have been very consistent at making a little over 1% per month, however.

NP: In short, Kelley is a very well respected expert with impressive returns that have been proven over a long period of time. While the Wilshire 5000 has posted 11.8% annualized returns for the past twenty years, Investment Quality Trends has brought subscribers a return of 13.2% over the same period. And the best part is that since you're investing in dividend-paying Blue Chips, you can rest easy at night while your money earns dividends and posts gains.

Q: Mr. Wright. Slight stray away from stocks. What are your thoughts on the real estate market right now?

KW: I am not a real estate expert. As a Southern California resident, however, I am a seasoned real estate buyer/seller. In my opinion, the market moved too high and will correct.

Q: So, I've been hearing and reading for the past several months.

NP: I have an important article in the March ezine (vol. 3, issue 3). The REITs CEOs have been CASHING OUT in the multi-million range since last summer and there is more product on the market now than over the last few years.

Q: Thanks. I'll check out the article.

NP: One thing to remember, however, is that we haven't received the international vote yet. Just when you think that our high end US real estate is over-valued, the foreign capital moves in! We're seeing that with the Dubai ports situation. There is a lot of interest abroad to buy US real estate. The last time around, the foreign capital, then Japanese, moved into the most desirable locations. Beverly Hills and Rockefeller Center benefited more than San Bernardino, California and Peoria, Illinois.

KW: Remember when the Japanese bought Rockefeller Center and Pebble Beach? Everybody howled that was the top, and we ended up getting those properties back at pennies on the dollar!

NP: That's right! Prices in Southern California are unsustainable for the average person. $490,000 median in LA, for crapola in undesirable locations (2-hour commute or high-risk neighborhoods)! $610,000 in Orange County?! Who can afford that? Remember, however, that foreigners are reading the headlines about the great returns from real estate in the U.S., too. From what I'm hearing internationally, investors abroad are interested in buying into U.S. real estate now. The ports move and the Unocal bid were not isolated incidents. We'll start hearing more about foreigners wanting to diversify and own hard American assets.

Q: Kelley, could you give me your thoughts on the purchase of Falconbridge by INCO and how it will affect the nickel company stock over the short term?

KW: Neither company meets our criteria. We typically buy companies when their prices are depressed and their yields are high. This is our primary goal; acquiring high quality companies when they offer value. We don't really care what a company does, as long as it meets our criteria and offers value.

Q: Could you share with us what companies meet your criteria that are involved in the Anti-Aging and Biotechnology sectors?

KW: I can't say specifically about anti-aging, but Sigma-Aldrich (SIAL) makes all of the chemical building blocks for the biotechs.

NP: Kelley, would you talk about the difference between Blue Chips and Breakouts for our guests. Both the risk and the reward factorsÉ

KW: Trying to catch a breakout is like trying to time a rushing train through an intersection. The best an investor can hope to achieve on a consistent basis is to identify an undervalue AREA and wait for Mr. Market to catch up and make you look like a genius.

NP: (errÉ. I've done pretty well at catching breakouts, but then again, I don't sleep AND I have access to CEOs that the average person could never dream of speaking to.)

KW: Natalie, you are way smarter than the average stock picker!

Q: Could you elaborate on what you refer to as Breakout because I have not heard that term before!

KW: A breakout is when you see the price action "breakout" from consolidation.

NP: It is clear from your language that your technical analysis is focused on aggressive performance. Aggressive performance means VERY HIGH risk. In fact, some of the most colossal losses on Wall Street are from HEDGE FUNDS who think that they are smarter than everyone else and try to catch those runaway trains at intersections. The difference in Kelley's message - and this is extremely important -- especially with the bulk of your 401 (k) - is that you should be able to rest easy at night and not have the worries that you can lose everything you are investing. This is achieved through proper asset allocation, portfolio diversification and making sure that you clearly understand the level of risk you are taking on.

KW: We have three primary goals: protect principal, earn an immediate and growing stream of dividends, and capture long-term gains for total return.

Q: I'm clearly a bear investor, as I seem to worry a lot! Which keeps me from investing promptly.

KW: We buy what the market doesn't like and hold it until the momentum players catch on and then we sell to them.

Q: That sounds wise.

NP: It is even more important for worriers to follow the rules of a company like IQ Trends. The most common way to lose money is to panic and run with the crowd - in any direction, buying or selling.

K: We worry about losing principal, but that doesn't make you or us bears. We recognize the value of capital.

Q: I'm a fundamental investor. I'm only learning about technical investing at this point and still skeptical about my ____ software. I'd much rather be on the golf courses of the world playing golf than spending 20-30 minutes a day on my lap top computer making trades.

KW: Equities are risky by nature. The greater percentage of equities one owns increases the level of risk. This is, of course, unless you buy high-quality companies when they offer historic value.

NP: So, what is the recommended formula for a mix of stocks, bonds, money markets, T-bills and how does it change with age?

KW: We are always long, or looking to be long. If we don't have any opportunities, we buy T-Bills.

NP: Interesting. So you're keeping your non-stock investments liquid (T-bills). Why? And how much of your current portfolio is invested, compared to percentage in T-bills right now?

KW: I'm not a bond guy. Bonds have no capital appreciation potential. I can also get a pretty good yield from my stocks, so bonds don't offer much to us. I'm about 75% stocks and 25% T-bills.

NP: Your system takes so much risk out of stocks that you are risk-adjusted almost to the more traditionally safe bond, right?

KW: Correct. Our newsletter is at 25% less risk than the Wilshire 5000. Our managed accounts have betas of about 35% to 40%.

NP: For our novice investors, a touted measure of percentages is to make sure that a percentage equal to your age is "safe" i.e. not invested in stocks or any other "risk" investment. As you get older, you move more to yield-bearing safe havens (like bonds, T-bills, money markets). Money managers like Kelley will overweight or underweight based upon current market conditions. Kelley, does 75% in mean that you are more optimistic this year than last?

KW: Not really. I just sold some TFX [Teleflex Inc.] and BLS [Bell South] though and haven't moved the proceeds yet. I don't try to market time too much. If there is stuff to buy that we like, we just buy it.

NP: Duh!! I'm overlooking that your article this month (March 2006) included a chart that makes a strong case that the market is overvalued. That means there is not much to buy right now, right Kelley?

Q: What are your thoughts about the Baby Boomers causing a stock market crash once they retire and learn their 401 (k), mutual funds, RRSPs have too many government restrictions? With health concerns, they'll need money to pay for their medical treatments.

NP: Unfortunately, now that people have to invest themselves, rather than have companies responsible for it, I don't think we have enough people who really understand how to protect their portfolio and what tax consequences there are for this and that withdrawal. I think ignorance will keep a lot of people "all in" on their 401 (k)s.

KW: Investing is about providing for someone's cash needs; either cash now or cash later. Inflation is a permanent given, so the price of goods and services will continue to go up in the long-term. This means we're all going too need a lot of cash. I think a high-quality portfolio of dividend-paying stocks with rising dividend yields is the best way to prepare for now or later.

NP: I'm more worried about headlines and bond yields attracting money in and out, than I am having a cohort of savvy aging investors who exit the stock market in droves.

KW: If bond yields keep going up that will change in a hurry.

Q: I'm absorbing all of this! It's been a very insightful chat, and though I was a bit shy, I've learned a lot, so thank you all so much.

NP: Novice investors are encouraged to check out the Investing Edu section of NataliePace.com for more Investing 101 tips. Also, I'm a big proponent for hiring professionals. You get access to Kelley's mind twice a month in his bi-monthly newsletter for less money than you probably spend on coffee. Subscribing to his newsletter more than pays for itself, while you rest easy, while your money does the work for you. For more information, visit the Investment Quality Trends web site, at www.IQTrends.com.

KW: It was my pleasure to be here! I would go anywhere to share time with Natalie!

NP: Likewise. A moment spent with the wisdom of Kelley Wright is a moment that cannot be better invested! Have fun, and stay tuned in frequently to NataliePace.com for more recipes for the rich life™.

Don't Miss Your chance to chat one-on-one with The Most Successful Blue Chip Stock Picker on Wall Street -- Geraldine Weiss, the founder of Investment Quality Trends, on Wednesday, April 5th, 2006, from

8:45AM through 9:30AM PT. Investment Quality Trends has the highest risk-adjusted returns for the past 20 years, according to Hulbert's Financial Digest. Their focus is dividend-paying Blue Chips. Meet Geraldine Weiss and learn what companies she thinks are hot for 2006. This is a subscriber's only chat. Try logging into the chat room now to ensure that you know how to! Also, find out more information on the chat in the Calendar section of NataliePace.com.

Email Tax Scams Involving an Official Looking IRS Email Address.

The Internal Revenue Service is warning consumers about an Internet scam in which consumers receive an e-mail informing them of a tax refund. The e-mail, which claims to be from the IRS, directs the consumer to a link that requests personal information, such as Social Security number and credit card information.

This scheme is an attempt to trick the e-mail recipients into disclosing their personal and financial data. The practice is called "phishing" for information.

The information fraudulently obtained is then used to steal the taxpayer's identity and financial assets. Generally, identity thieves use someone's personal data to steal his or her financial accounts, run up charges on the victim's existing credit cards, apply for new loans, credit cards, services or benefits in the victim's name and even file fraudulent tax returns.

The bogus e-mail, which claims to come from "tax-refunds@irs.gov" tells the recipient that he or she is eligible to receive a tax refund for a given amount. It then says that, to access a form for the tax refund, the recipient must use a link contained in the e-mail. The link then asks for the personal and financial information.

The IRS does not ask for personal identifying or financial information via unsolicited e-mail. Additionally, taxpayers do not have to complete a special form to obtain a refund.

If you receive an unsolicited e-mail purporting to be from the IRS, take the following steps:
* Do not open any attachments to the e-mail, in case they contain malicious code that will infect your computer.
* Contact the IRS at 1-800-829-1040 to determine whether the IRS is trying to contact you about a tax refund.

More information on these and other scams may be found on the criminal enforcement page at IRS.gov.

Debt-Free and Delighted:

by Kassie Welch

How to Consolidate and Eliminate Your Bills and Prosper.

It's tax season and the reality of your spending is there in black and white. As you calculate the interest you've paid to Visa, Mastercard, Discover and American Express you think how nice it would be if you were debt free. Unless you've got a winning lottery ticket, a debt consolidation loan is a debtor's dream. Consolidating could help with just one monthly payment, and allow you to finally pay off those debts, if you plan properly.

Consolidating bills isn't always easy, especially if you've fallen behind in payments. If you have late payments, are between jobs or have a lot of debt, it can be hard to find a consolidation loan at a lower interest rate than you're currently paying. If so, you could end up deeper in debt than when you started, especially if your new monthly payments are higher than what you're currently paying, making you cash poor.

When consolidating your debt keep these three goals in mind: 1. Get the lowest interest rate possible 2. Keep your payments affordable so that you don't go into deeper debt and 3. Have a plan to pay off your debts in 3 - 5 years, if possible.

Here are some of the best ways to consolidate:

Using Credit Cards - Balance transfers are like manna from heaven if you have a good credit rating. Call your current creditors to ask what interest rates you're eligible for if you transfer your balances. Even though the short term zero percent interest rate is attractive, go for a fixed rate until the balance is paid in full. With interest rates rising, it's a safer bet to commit to a rate today than to risk where rates will be after the zero percent "honeymoon" phase.

If you can't negotiate a lower rate with your current creditors, try shopping for a new card. Be careful not too apply for too many accounts in a short period of time since it may hurt your credit rating. Once you've consolidated into one account, set up auto payments since lower rate options are only good if your account is in good standing.

Using Equity - If you own your home, refinancing or taking out a second mortgage might be a better choice. Although you're "betting the farm" so to speak, the interest on your home loan will probably be tax deductible; making the true cost of consolidating less expensive. (Please check with your certified tax preparer regarding your specific situation.)

Deciding whether to refinance or take out a second mortgage depends on your existing interest rate. If you currently have an adjustable rate mortgage, I recommend a "cash out" refinance into a fixed rate mortgage, unless you plan on selling your home in the next few years. Again, with rates going up, it's better to be safe than sorry.

If you currently have a low fixed rate mortgage, then a Home Equity Line of Credit (HELOC) or a fixed rate second may better suit you. A HELOC is like a credit card on your home that you can borrow against repeatedly, whereas a fixed is a set loan/ payment amount paid off usually over 20 or 30 years. The advantage of the HELOC is that you can borrow money from your home and pay it off repeatedly without refinancing each time you want/need money. Also, HELOC payments tend to be lower, since they're interest only (please note the balance does not pay down unless you make additional payments).

The disadvantage of HELOC loans is the interest rate, which is usually tied to Prime and increases each time Prime goes up. If you're worried about increasing interest rates, then a fixed rate second would be your best choice. The payments are initially higher, but there are no surprises down the line.

A word about consumer credit counseling organizations, although they may negotiate lower interest and/or payments, it's often at the expense of your credit rating. There's nothing worse than getting out of debt only to discover you now have low FICO scores, which mortgage lenders and large purchase financiers use for making their decision and pricing. Also, if consumer credit counseling appears on your credit report, it's like a waving a red flag to potential creditors saying, "I can't manage my money." If credit counseling seems to be your only choice, choose wisely making sure that whoever assists you does so with anonymity on your credit report and without your current credit being considered derogatory.

The key to consolidation is to create a plan that allows you to pay your debt down in a reasonable amount of time and have enough cash to live on meanwhile. There's nothing worse than restructuring your debt into one large bill, only to need to use your credit card the next time your car breaks down or some other "emergency" comes up. Managing debt is challenging, but it can be done. If you're a homeowner, call your Mortgage Professional to discuss your options.

An eighteen-year veteran of the real estate finance industry, Kassie Welch began her career at the Bank of New York (BONY) in the Mortgage Banking Division. At BONY she was trained in all areas of financial services, from processing and underwriting to secondary marketing and loan servicing. In addition to a degree in Business Administration from California Polytechnic University, she holds certifications in appraisal, underwriting and fraud detection/prevention from the Mortgage Bankers Association. Kassie is known for her integrity and dedication to getting her clients the best possible rate/loan program to meet their needs.

Hot News on Cool StocksÉ

by Natalie Pace, CEO, NataliePace.com, respected journalist and top-ranked in performance by TipsTraders.com

Natalie Pace, CEO, NataliePace.comª

See below for Important highlights from the New York Times, Money Central, Reuters, Bloomberg, CNBC, Fox News, policymakers and more. Alphabetized for ease.

General Motors lost $10.6 billion in 2005, as it struggled with high labor and commodities costs, loss of U.S. market share to foreign rivals and sluggish sales of sport-utility vehicles. GM also restated earnings for the past several years.

Though Ford Motor Company has the highest amount of underfunded pension liability, at -$12.306 billion, is laying off, plans to spend a billion on restructuring and is expected to loss money in 2006, the corporation is still receiving an average 7 stock ranking (out of 10) on MSN.com (source: Standard and Poor's, July of 2005). In their most recent 10-K filing, Ford warned that the company may not see a profit in 2006, due to declining market share and escalating costs (the cost of metals are through the roof). This is why trading on analyst recommendations is one of our Top 10 Investment Mistakes. Click to review the other nine.

Ford FYI: Chairman and CEO Bill Ford will receive no salary, bonus or long-term compensation this year unless the automaker reaches sustained profitability.

International Automated Systems Inc. (OTCBB: IAUS) has signed a $150 million purchase and installation contract to install a turnkey 100-megawatt power plant for Solar Renewable Energy-1 LLC of Nevada. This contract is subject to finalized funding and approval by the Public Utility Commission Nevada. IAUS is trading on the "pink sheets," and should therefore be given 100X the research before even thinking about investing.

Yahoo is still number one on the worldwide web, though Google and Microsoft have the worldwide war chests, with market caps of $112.1 billion and $279.3 billion respectively, compared to Yahoo's $45.92 billion.

Source: comScore Media Metrix.

Stats, Facts, Quotes and Educational Information:

1. There are two very important events this month. Chat one-on-one with the #1 Blue Chip Stock Picker in the U.S. on 4.5.06. Attend the most high-profile networking conference in the U.S. - the Milken Global Economic Conference April 24 - 26^th. For more information, visit the NataliePace.com calendar at www.NataliePace.com.
   
   
2. Higher Interest Rates. The Federal Open Market Committee decided on 3.28.06 to raise its target for the federal funds rate by 25 basis points to 4-3/4 percent, for the 15^th consecutive rate hike, and believes that "further policy firming may be needed." Click to review the FOMC Press Release from the March 27th and 28th, 2006 meeting.
   
   
3. Don't Buy High. The Dow Jones Industrial Average and the S&P 500 are trading close to their historical highs set back in 2000, while the NASDAQ is still almost 50% off from the highs set back in March of 2000. Investment Quality Trends, which tracks over 309 Blue Chip stocks, notes that only 26, or 8.5% of Blue Chips, are in a buying range right now. (For more Info, read "Want to Be Sexy and Fiscally Fit?" in last month's ezine.) Investors are still feeling the burn from the NASDAQ crash, but corporations are not. This time around, technology and the Internet are making real money, and cash-rich/capital-rich corporations are in need of finally updating their software and technology. Technology is on a number of analyst's lists for being in favor, while blue chips have a concentration of the corporations that are suffering from "legacy costs." It may be time to lick old wounds and rummage through the research of your old favorite Internet stocks again, while trimming back your exposure on legacy corporations with structural challenges, like automakers, defense contractors, airlines, and/or any corporation established before 1980 that still has a defined-benefit plan.
   
   
4. Real estate is on everyone's bubble warning list, but one thing to remember is that we haven't received the international vote yet. Just when you think that our high end US real estate is over-valued, the foreign capital moves in! We're seeing that with the Dubai ports situation. There is a lot of interest abroad to buy U.S. real estate. The last time real estate skyrocketed, in the 1980s, the foreign capital, then Japanese, moved into the most desirable locations. Beverly Hills and Rockefeller Center benefited more than San Bernardino, California and Peoria, Illinois. The ports move and the Unocal bid were not isolated incidents. We'll start hearing more about foreigners wanting to diversify and own hard American assets. The U.S. ranks pretty high on the most desirable countries to live in, in the world.
   
   
5. 20 BIG WINNERS, which keeps the companies featured in NataliePace.com at the top in Annualized Returns (according to TipsTraders.com). This hot news article still has the proud honor of featuring twenty companies that have posted positive gains, versus just seven that have gone south. Of the seven that have gone south, we were most concerned with Krispy Kreme, but with the hiring of Kraft Foods veteran Daryl Brewster as president and chief executive that company is clearly moving forward. Turnarounds are difficult to stomach, even the turnaround of the most popular sweet on the planet. Lawsuits and challenges remain. OSI Pharmaceuticals, Sirius Satellite Radio and Yahoo - in our view, these are all great companies with exceptional products and/or leadership. Sometimes it takes awhile for the rest of the investment world to realize that. Still love Jet Blue as a consumer, but the sector is in trouble until they figure out how to make solar-powered planes. Tried to hang with Martha Stewart Omniliving, but, despite a recent jump in ad revenue, the flops were adding up more than sales.

Bottom Line: NataliePace.com is providing you with news and important information, but you need to consult your financial planner to determine your best strategy for using the information. That will depend upon your age, your retirement plan, and your risk tolerance and portfolio diversification. The stock portion of your portfolio is a higher risk classification, where you ideally seek to gain higher returns. As the NASD said in a recent investor alert, don't bet the farm on the stock market. NataliePace.com is NOT a brokerage and doesn't operate or act like one. We are an online media service with a mission of providing the news and information you need to make better choices in business, investing and personal prosperity. Always consult a trusted financial professional before buying or selling any security.

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

Hot Stocks
Investors who "never pay retail," note that highlighted stocks are trading at their 52-week lows or near the price featured in NataliePace.com's article. It may be a good buying opportunity. The companies that are listed below which are not highlighted may not be in a good buying range, but they appear to be poised to continue performing well. There are never any guarantees in life, and all stocks are risk-based investments. Consult your certified financial planner before making any changes to your investment strategy.

Stocks in Profit-Taking Range. Note: The news is still favorable on some of these companies (so far) for the long-term (as in Genentech and Google), which means if you have them in your 401K or long-term portfolio, you might want to keep them there. However, for the trading portion of your portfolio, in a market of modest gains but high volatility, many analysts recommend taking profits in shorter windows. A gain is a gain. If you took gains from Google two months ago, your individual shares were worth $80 more than they are today.

We may look to add some of these great companies to our hot news list again, if the price point should become attractive (as we did NetGear last month).

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 security.

IMPORTANT DISCLAIMER: Information has been obtained from sources believed to be reliable however NataliePace.com LLC does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication 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.

No Powder Puffs at This Power Lunch.

by Maya Patel.

C-Level Women Reveal Secrets of the Executive Suite.

Marna Borgstrom Photo credit: Frank Poole.

The sounds emanating from Cipriani in Manhattan on Thursday afternoon could have easily been mistaken for those of a sample sale. In fact, it was the buzz of women networking at the National Association for Female Executives ("NAFE") lunch gala honoring the Top 30 Companies for executive women. The only shopping taking place was at the silent auction.

To develop this list of 30, NAFE looked beyond words and analyzed actions. They examined how women fared among the company's five top earners. Among the Top 30 Companies, 18.7 percent of top earners are women, compared to fewer than 6 percent in the Fortune 500. Only 1.4 percent of Fortune 500 CEOs are women. (Source: Catalyst, Top Barriers to Women's Advancement)

NAFE also considered the number of women on corporate boards. The New York Times Company stood out, with women representing 40 percent of its board. Colgate-Palmolive, General Mills and Texas Instruments also have board ratios as high as one-third female.

The fashionable attendees spanned all industries and age groups. For many of us, it was our first time attending a NAFE event. After exchanging ideas and cards, we took our seats to listen to a panel of 30 women. They became our momentary mentors. They responded to several rounds of rapid fire questions. Each answer was uniquely delivered, but they all had a common motif.

1. On finding work life balanceÉfind something in your job that connects to your personal interests and take time out for yourself every day, especially to exercise
2. On risks of leaving a careerÉdon't lose confidence and remain connected to the field.
3. On careerÉdoes not need to be mapped out-do not be afraid to try something new.
4. On overcoming impedimentsÉno door is closed until you peak in - do not accept preconceived notions about what you can and cannot do until it has been tried.

Their wisdom revealed fundamental truths about the way women work:
-The most fun jobs are those where we can interact and understand people.
-Impacting people and the world is vital.
-Doing what we believe in is paramount.

The Top 30 Companies recognize the expertise and instincts of women.
Scholastic, Hewlett-Packard, Knight Ridder and Yale New Have Hospital were among the companies that excelled in the representation of women in top-tier positions relative to the number of women employees overall. At Yale New Haven Hospital, women fill 100 percent of the top-tier positions reporting to the CEO.

Marna Borgstrom is the President and CEO of Yale New Haven Hospital and Health System. In October 2005, after 26 years of service, she was the unanimous choice of both the search committee and the full board of trustees for the position. She is the first woman to be named as president and CEO of the hospital and health system.

I was honored to chat with Marna Borgstrom at the gala. She had a phenomenal mentor that recognized her P&L talent before she did. I was curious if gender affected her role and she explained that with a job there is a vision that needs to be demonstrated. How it is demonstrated varies based on each person and how women do it may be different. Ms. Borgstrom believes that if people are nurtured, they perform better and that they should be "given permission to be complete." She values relationships and when asked to describe what has changed since becoming CEO, she said her peer group. She spends considerable time with the board of directors. Her guidance to us: 1) live your values in everything you do; 2) demonstrate intellect and ambition and 3) value relationships because what goes around comes around.

The intangible life skills shared at the luncheon were priceless. Based on the post-gala whispers, this was among the most engaging lunch appointments for many women.

Maya Patel is an associate in the Debt Capital Markets Group at Harris Nesbitt Corp. She focuses on the origination, structuring and execution of high yield and investment grade public and private debt financings, as well as private equity transactions. Previously, she was an analyst in the Leverage Finance Group at Citigroup Global Markets. Email: maya.patel@harrisnesbitt.com

The Theory of Economic Evolution.

by Natalie Pace, CEO, NataliePace.com™.

Why Mid-Caps are Safer Than Blue Chips in 2006, and China will Continue to Flourish.

Warning: This is very dense. Do not attempt to operate heavy machinery while reading. If you have insomnia, this might be a good way to get to sleep!

Many people have asked me my secret to finding the leader in the sector-- that company that is poised to lead the pack, to break out of the current growth trend and shine in product sales and share price growth. Typically, I try to keep the NataliePace.com articles focused on simple "recipes for the rich life," through easy to understand and implement strategies that will jumpstart your journey forward on the path to personal wisdom, which is the foundation of prosperity. However, in this article, I will begin to pull back the screen on the way I perceive the world, through the dynamics of economic incentives, and talk about a more sophisticated hypothesis that I have been employing for years.

The underpinnings of my personal strategy to featuring great breakout companies and countries (we featured China in 2002, Google at the IPO and Eastern Europe in 2004), is based upon a rather progressive, yet common sense, view of economics, which I call the Theory of Economic Evolution.

The Theory of Economic Evolution timeline:

1. Right to Vote
2. Right to Get Any Job
3. Right to Will Your Estate

The theory of economic evolution basically flows from the premise that, regardless of how emotionally mature or immature a person is, the desire to win the lottery, rule the world and have princes and princesses for children (i.e. economic gains) is primal and can be (and is throughout history) harnessed for the greater good by an effective leader.

Before I get into the details of this theory, let me fully disclose that, while I have put the Theory of Economic Evolution to good use in my lifetime, this theory has not yet been scientifically tested, nor academically challenged. In fact, I am publishing this theory now, even in its state of imperfection, having not withstood rigorous academic brow-beatings from my peers, because, regardless of confirmation from the lab, it works for me, and there appears to be enough substance here to warrant more attention. In addition, I hope to encourage comments, questions and critical thinking from my peers, the academic community and you, my inspired readers, so that the theory can be further tested and more completely understood. I am actively seeking an academic partner to throw darts at this theory, sift through statistics, question its efficacy, and to develop proofs designed to prove or disprove the model.

According to this theory, the a priori tendency toward not just "freedom," but economic freedom, is so fundamental to human interaction that virtually everything from war and peace, revolution and civil disobedience (gang warfare), divorce rates and employee productivity, can be predicted based upon this fundamental model of social evolution. While a country, or a company or even a marriage is advancing along nicely on the evolutionary timeline (which is essentially a path toward greater personal freedom), the citizens, employees and marital partners have more tranquility and the ground for prosperity and productivity is rich. Conversely, when a subset of the population, whether it be citizens, employees or a marital partner, feels trapped and stifled in their Ôrights' to economic freedom, the seeds for contention are sown, and the ground is ripe for chaos, war, strikes, divorce and other "unproductive" uses of time (arguing, complaining, etc.).

Common sense tells you that happy, productive people make better products faster and cheaper, so, according to the theory, the country, corporation and marriage that paves the path for personal freedoms is the country, corporation and marriage which experiences the greatest sustained prosperity. Common sense and observation of human behavior also tells you that unhappy people throw a wrench in the works. Civil disobedience, union strikes, marital strife, civil war, etc. occur when individuals are no longer engaged and "invested in" the success of the social structure. The theory of economic evolution suggests that the most fundamental way of keeping individuals actively producing and invested in the success of the country, company and/or marriage is to satisfy an innate longing for personal economic freedom.

Now, this is a case of the means being more important than the ends, i.e. the journey up the road is more important than arriving at the end (and, theoretically, there is no endÉ simply more stages that have yet to be discovered and employed). In practical matters, a 20-year-old may not see far enough into his future to care if you provide a retirement plan or health care package (that will make it easier for his estate to remain intact and willed to his children), but is keenly interested in career advancement now. The 20-year-old just got the right to vote and is now looking to get a better job. The forward-thinking company, knowing that the individual will care in the future, will pave the path for continued prosperity by offering a 401 (k) to individuals after a certain period of employment. (The choice still rests with the individual on when to start investing, which is consistent with the theory.) On the other hand, a 60-year-old may make career choices based SOLELY on matters of the estate. She has had the right to vote for years and is looking toward retirement, not career advancement. Thus, how well a company, a marriage and/or a country "frees up" the rights of its citizens to stride forward on the evolutionary path to economic freedom, is one of the most reliable measures of peace, productivity and wealth.

My own limited point of view serves also to illustrate how the model works. The U.S. is, by my calculations, about mid-way between the right to get any job and the right to will one's own estateÑa controversial premise, which I will explain further in the next paragraph -- and yet, as close as I am to the brink of willing my own estate, I cannot, yet, see what lies beyond the economic freedom of willing one's own estate. Imagine then, how a slave or a servant may not see far enough in the future to imagine owning his/her own plantation or becoming a doctor, but is willing to risk his/her life to join the cause for freedom and the right to vote. (We saw this in Afghanistan in 2004, when women risked their lives to vote. Some were killed.) Likewise a young assistant may not be overly concerned about the 401 (k), but is highly motivated to get a raise and a promotion.

As one steps along the path to economic freedom, one sees the next plateau to attain. As long as one is moving forward, the perception is "freedom," which is an "engaged" state of being -- highly productive and invested in the outcome and continued success of the societal structure (government, corporate or marital). This personal feeling of empowerment, of having all restraints on personal prosperity and potential stripped away is both powerful and productive, and far more difficult to employ in practice, than it is to dream up in theory. This is especially true because even the most "free" countries and companies have a current structure that ends personal freedom with the right to will your own estate. This means that countries and corporations enter a period of stagnation when too many of their citizens/employees retire (and end their personal march to greater economic freedom).

Now, back, for a moment, to the current state of affairs in the U.S. The U.S. is well advanced on the timeline in legal economic rights, but not in practice. Blacks had the right to vote for 100 years before they could really exercise the right to shape the larger social structure; they were still forced to segregate themselves as late as the 1960s. High schools in poor communities experience the highest dropout rates, which limits the ability to secure most jobs. Not surprisingly, the poorest neighborhoods with the highest dropout rates also have higher crime rates, which is consistent with this economic evolutionary theory. Many poor U.S. communities are stuck between the right to vote and the right to get any job.

Some immigrant groups are very good at quickly advancing economic freedoms, which includes placing education as a priority. This, again, is consistent with the theory, and helps to explain why minority groups that invest in education are also quick to assimilate and prosper in the larger community. These immigrants jump on the road to getting any job they desire and drive directly toward the active right to will their own estate.

The Theory of Economic Evolution might explain why freedom, fulfillment and education are correlatives of productivity, which is in turn a key predictor of economic growth. People are happier when they are evolving along the path toward greater economic freedom, and education is fundamental to getting any job you want and to learning how to will your own estate.

Likewise, in the U.S., women won the right to vote 100 years ago, but as late as the 1970s, no woman was the head of any Fortune 500 company that she didn't inherit. (In 1982, Christy Hefner became one of the first female Presidents of a major corporation in the U.S, as the President of Playboy Enterprises, her father's company. In 1988, she was elected Chairman and CEO.) Even today, women account for only 13% of Board Directors, only 15.7% of corporate officers, and women of color hold only 1.6% of C-level (as in CEO, CFO, COO) spots. In most families, men are still more likely to handle the nest egg. Single mothers make up the largest percentage of people living in poverty.

This theory suggests (but has not yet empirically proven) that if society and the marital partners could do a better job of satisfying the innate march of economic evolution for both sexes, which is essentially a march toward the freedom to choose one's personal destiny and prosperity, the social structure of marriage might be more successful. Today, about half of the marriages in the U.S. end up in divorce.

I do not intend to suggest here that one paragraph of explaining how the model works in theory is proof of anything. Statistics must be analyzed and the model must be tested. What this article is intended to do is to provide a skeletal overview of the Theory, to point out a few areas of societal strife that might be targeted for further analysis, and to reveal some of the ways that I have utilized the theory to identify countries and companies that are poised for robust economic growth, the majority of which experience more prosperity and productivity than their peers (and have earned me quite a reputation among my colleagues).

As another illustration of how this theory works in real life, one can turn to the explosion of economic prosperity currently occurring in Eastern Europe and China. The former was a region where all rights were stripped away by civil war. The latter is a Communist country that has only recently, and aggressively, moved to a free economy.

Eastern Europe has a very high concentration of well-educated persons. Over the last few years, many Eastern European countries have been aggressive about advancing personal freedom to own property and about establishing pro-business policies. As a result, Luxembourg, Estonia, the Czech Republic, Belgium and Lithuania all rank in the 25 most economically "free" countries in the world, according to the Center for International Trade and Economics. The Gross Domestic Product growth rate of these Eastern European countries has been on the high end of the world's countries, double that of their Western European counterparts.

2004 European GDP growth rate.

Source: 2006 Index of Economic Freedom

While Eastern European countries are rebuilding and enjoying an infusion of capital and prosperity, Western Europe is experiencing more panic, public insurgences and violence. The headline story in the New York Times on March 29, 2006 was "French Protests Turn Violent." Why were rioters demonstrating against new youth labor laws in Paris? The theory would suggest it is because Western European social policies are being challenged (thus one's "estate" is being threatened), while jobs are migrating to Eastern Europe (where the citizens are as educated but can be paid less).

Instead of producing goods and actively participating in the prosperity of France, on March 28^th, citizens stormed the streets. The Eiffel tower was closed. French newspapers were printed but not distributed. Mail was not delivered. The Paris National Opera canceled its ballet performances. More than a million people left their jobs and rioted--labor unions claim it was up to three million--to protest a law that was passed by Prime Minister Dominique de Villepin last week, which allows employers to dismiss workers who are under the age of 26 "without cause" during the first two years of employment.

While Western European citizens had a very optimistic view of their future in the past, today their right to get any job they want AND their estate is being threatened. Western Europe is in the delicate position of having to prevent backsliding on the Economic Evolution model. On the other hand, the future and job possibilities in the former war-torn Eastern European countries have never been better, and productivity is, as a result, booming.

Now, the Center for International Trade and Economics ranks countries by the amount of freedom currently allowed in business and property rights, whereas the Theory of Economic Evolution places more value on how well the country is removing impediments to progress toward greater personal economic freedom. According to the 2006 Index of Economic Freedom, Germany qualifies as 19^th most free, France #44, while China bottomed out at 111^th out of 157 countries. Yet China's Gross Domestic Product growth rate was 9.5% (in 2004 and 2005), the highest in the world, double that of most countries in Eastern Europe and far superior to Germany's stalled 1.6% GDP growth rate. (India, another country which ranks low, #121 on the Index, but is making huge strides forward in the economic freedom of the individual, is experiencing 8.6% GDP growth rate.)

What gives? China may not have advanced individual freedoms, by Western standards, but the growth of personal freedoms on their own economic evolutionary timeline is extremely robust. This "Confucius" government is actively promoting personal enterprise at an unprecedented rate, and thus the optimism of the inhabitants is high, as is productivity and growth. People are moving into the cities at unparalleled proportions and opening up new businesses like mad. It's hard to imagine that the student-led Tiananmen Square revolt (and massacre) was just 17 years ago (April - June 1989).

China and Eastern Europe are great examples of how robust "forward movement" in economic freedom is a better predictor of productivity than an advanced, but static (or declining), current state of freedom. As demonstrated by the riots in Paris, many citizens have become more invested in fighting for their rights (against the state) than they are in working hard to make France a great, productive nation. Not surprisingly, productivity and GDP growth is stalled in many Western European countries, and the region faces hard choices over the next few years.

Likewise, we are seeing those same challenges in many of the more mature corporations in the U.S. The airlines, many defense corporations and the U.S. auto industry are suffering under "legacy" costs, the enormous burden of providing health and pension benefits to a large pool of retired workers. As a result, ANY corporation with a defined benefit plan that has a large pool of non-workers to support is hard-strapped right now to compete in the global environment, and is likely in talks with their labor and retirees to reduce wages and cut benefits. The workers, quite understandably, are horrified at having their salaries and benefit plans cut in half (or more). This means that labor (and their unions) is prepared to focus away from productivity and profitability and on the fight against their employer to keep what they've got. This is consistent with the theory. Anytime an individual feels like s/he is losing ground on personal freedom and prosperity, strikes, walkouts and poor productivity are more apt to occur.

Is there any way to keep productivity high during a challenging period of readjustment? The theory suggests that in an environment of building or rebuilding, leadership is essential to laying the groundwork for personal economic freedom, which is necessary for progress and productivity. The answer might lie in always laying the groundwork for the next step of personal economic evolution (rather than end it with retirement), something that just hasn't happened in most societies. What we can say is that in a challenging environment, employees and citizens are vulnerable to a message of hope (whether or not it is a message of truth), which is necessary for keeping citizens and employees invested in productivity. (Someone organized the Parisian riot of 1-3 million people, convincing them that warring against government is the most productive use of their time, and will give them what they want.)

A society, corporation (or marriage) is extremely vulnerable any time that the individuals experience stagnation or backsliding on the Economic Evolutionary timeline. Thus the leader who is invested with saving his company or country must convey, at a minimum, that no one will be stripped of rights, and everyone, including the "higher ups" will share in the burden of working hard to get out of the rut. In short, the perception of freedom and personal gain - what's in it for me -- must not wane. Thus, in theory, the troubled corporation or country whose leaders take a salary cut, if they are expecting their workers to take one, should be more popular with the staff (and thus have a more productive labor force) than those who pad their golden parachutes, even as they shuffle employee pension plans over the to U.S. government.

If you can determine the ethos of the leader, in either circumstance, you will be able to determine the pathos of the organization, and from there predict the ultimate outcome - success or failure.

It appears to be much easier to be an emerging country or corporation that is trodding up the familiar path of economic evolution (like Jet Blue and China), than it is to be a mature country or corporation that must re-ignite the passion of its citizens and workers by getting them to think beyond their pension plan (like Delta and France). While Delta Airlines deals (in bankruptcy) with disgruntled unions and disheartened workers, JetBlue has full planes that take off and land on time. JetBlue's employees don't make more money than Delta's, but they are happy about their jobs, and happy about their 401 (k)s (which they control). Reservation clerks can work from home, which gives mothers greater flexibility in their employment options.

This observation, again, must be tested to determine if the model might help us to understand the dynamics of freedom and prosperity, and thus discover the next evolutionary milestone that mature companies and countries can advance toward. In the real world of NataliePace.com's success at featuring corporations, countries and sectors that are poised to outperform their peers, the theory has proven to be quite prescient. (Tipstraders.com, an independent tracking firm, calculates the performance of the companies featured in NataliePace.com at above 55% annualized, that is EVERY YEAR, which puts my success at writing about prosperous corporations at the top of over 700 A-list pundits and journalists.)

There are many "Blue Chip" corporations (specifically I'm talking about companies that were founded before 1980, that have unions and defined-benefit plans) that are deeply in debt to their pension benefit plans, far more than investors are aware of because corporations are not required to include the obligations in their accounting. Any corporation that still has a defined-benefit plan, rather than a 401 (k), where there is a large financial obligation to a large pool of retired workers, is vulnerable to productivity challenges, according to the Theory of Economic Evolution. Perhaps the most important thing an investor should consider in 2006 is how much exposure their portfolio has to corporations that will experience the challenge of re-igniting the passion and productivity of their staff in an environment where benefits and salaries may have to be cut.

Delphi, Delta, United Airlines, U.S. Airlines, Northwest Airlines, General Motors, Ford Motor Company, IBM and more are not isolated incidents. To review which corporations are the most indebted to their pension plan obligations, please read the article, "39 of the S&P 500 companies that are most deeply in the red on pension plans," from NataliePace.com volume 3, issue 3.

The Theory of Economic Evolution might explain the genetic reason "why" that human capital (education, health care and social safety nets) is the most reliable way to ameliorate suffering in the world, suffering in the company and suffering in the marriage. It would suggest that it is important to have all individuals feel free to pursue their highest desires and achieve their greatest potential. The a priori right to personal fulfillment of this economic timeline must be perceptibly advancing in order for peace, stability, productivity and economic growth to occur.

In future articles, if this one hasn't already bored you to tears, we will put the theory to the test and examine how freedom to have any job you desire is broader than just allowing an intern the opportunity to become a managing director, or a copper miner's daughter the right to become the next Nobel Laureate, or a mother the right to stay at home with her children. Check out the Sharing Wisdom Bulletin Board on this topic to post your comments, ask your questions, suggest further areas of examination, and to see whether or not my Ph.D. friends think I'm full of bull or really onto something here.  

Calendar:

Conferences, subscribers-only chats, galas, networking, teleclasses, seminars and other special opportunities! Check out what's happening online at the Calendar section of the web site.

There are two very important events this month. Chat one-on-one with the #1 Blue Chip Stock Picker in the U.S. on 4.5.06. Attend the most high-profile networking conference in the U.S. - the Milken Global Economic Conference -- from April 24 - 26^th. For more information and registration information and links, visit the NataliePace.com calendar at www.NataliePace.com.

Get smart in a series of NataliePace.com opportunities to meet financial and business professionals! Mark your calendars!

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.
For more information on NataliePace.com contact us at www.NataliePace.com, P.O. Box 1350, Santa Monica, CA 90406-1350 or 1-866.476.7442 (toll-free telephone number).

NOTICE: NataliePace.com is NOT a stock brokerage service, and does not operate or act as one.