ACCESS A PRINTABLE COPY OF THIS NEWSLETTER CLICK HERE.
Vol.4 Issue 9 September 1st, 2007
Send comments and suggestions or get more information
Quote of the Month:
"It is not
the responsibility of the Federal Reserve--nor would it be appropriate--to
protect lenders and investors from the consequences of their financial
decisions. But developments in financial markets can have broad
economic effects felt by many outside the markets, and the Federal
Reserve must take those effects into account when determining
policy… The Committee continues to monitor the situation and will
act as needed to limit the adverse effects on the broader economy
that may arise from the disruptions in financial markets."
Chairman Ben S. Bernanke
At the Federal
Reserve Bank of Kansas City's Economic Symposium,
Jackson Hole, Wyoming
August 31, 2007
- Justice Sandra Day O'Connor on Peace and Fairness
in Iraq. Exclusive Interview with
- Is It Time to Move Out of
REITs (Real Estate Investment Trusts)?
By Natalie Pace. Includes a REITs Stock Report Card.
- Real Estate Blues: From Red-Hot
to Bankrupt. Subscribers
share their pain and sound solutions with Steve Dietrich,
president of Financial Research Group.
- Uranium, Sure Shots from Self-Proclaimed Gurus,
and Other Ways to Lose Money. By Natalie Pace.
- Welcome to the BIG Buy Low. By Steve Selengut, author of The
Brainwashing of the American Investor.
- The September Back to School Stock Sales and Other
Wall Street Secrets.
By Natalie Pace.
- Boycott the If I Did It
book. A special message
from Denise Brown.
- The Truth Will Set You Free-But First, It Will
Scare You Silly.
By Chellie Campbell, author of Zero to Zillionaire.
- How to Find a Financial Advisor. By
Rande Spiegelman, vice president, financial planning,
Schwab Center for Financial Research.
- Still Number One After 25 Years. Kelley
Wright, the managing editor of Investment Quality Trends,
reports on his Select Blue Chip Stocks.
- The Markets Are Up On the Year. So Why All the
By Natalie Pace. Includes my Hot News on Cool Stocks list.
- NataliePace.com Calendar:
Shine and Promote Peace and Prosperity at The 2007 Solar
Conference, the U.N International Day of Peace and the
Blue Chip Stock Chat with Kelley Wright: just three of
many amazing September events.
Justice Sandra Day O'Connor on Peace and Fairness
Interview with Natalie Pace.
Sandra Day O'Connor (ret.) Photo by Steve Petteway, Collection
of the Supreme Court of the United States.
The War in Iraq
is one of the most divisive subjects of our day, and one that no
political leader has an easy solution for. As the authors of the
Iraq Study Group Report noted, "No one can guarantee that any
course of action in Iraq at this point will stop sectarian warfare,
growing violence, or a slide toward chaos." However, with hundreds
of thousands of soldiers and hundreds of billions of dollars committed
and a war that has entered its fourth year without abatement, a
pathway to peace and prosperity must be forged and death, violence,
destruction and mayhem must be curtailed.
It's hard to
imagine a peace and prosperity when car bombs are exploding every
day, and frankly, as you can easily imagine, the smart flee. As
Dr. Gary Becker (Nobel Laureate economist) pointed out in an interview
with me last May, the brightest and most capable are the first to
emigrate when a country falls into a chronic period of war. So,
how do you entice the professionals and entrepreneurs of Iraq to
stay and rebuild and create jobs? How do you make it safe enough
for them to stay?
Day O'Connor (ret.), one of the experts of the Iraq Study Group,
knows more than a little about promoting peace, prosperity and equality.
For 25 years, she was an Associate Justice of the United States
Supreme Court, one of the most powerful women in the United States
and in the world, and she had to crack a glass ceiling (without
violence) to get there.
In the 1950s,
as a woman who graduated in the top 3% of her law class at Stanford,
Justice O'Connor had difficulty getting an interview above the level
of secretary, though her male colleagues found jobs easily enough.
In 1981, Justice O'Connor did have the last laugh on those law firms
that refused to interview her, however, when she became the first
woman appointed to the Supreme Court in the U.S. Justice O'Connor
served the public good on our nation's highest court until last
year, when she retired to spend more time with her ailing husband,
So, given her
involvement with the Iraq Study Group, as well as her legacy as
a public servant, I asked Justice O'Connor for her insights on what
the U.S. should be doing to promote democracy in Iraq, end the war,
and bring our soldiers home. What, if anything, can the U.S. do
differently? What is the best way to bring together the warring
factions in the country? Is there anything that the average American
citizen can do to help? How can Americans prevent discrimination
against women and non-Muslims in Iraq and against Middle Easterners
in the U.S. and throughout the world? After four and a half years
of U.S. involvement on Iraqi soil, it certainly doesn't seem like
sending more soldiers is doing the trick.
openly shared her wisdom and insight, by email, on strategies for
promoting peace, prosperity and equality both at home and abroad.
While Justice O'Connor didn't offer a panacea for peace, her comments
about Iraq, and what is needed to establish security and promote
peace and prosperity in that country and at home in the U.S., are
bold, astute and candid.
Given your legacy in justice in the U.S., you have come across the
circumstances and stories of despair and reform that most of us
will never see, across an evolutionary timeline that has fostered
greater personal freedoms, particularly with regard to gender and
race. (Ed's Note: Justice O'Connor was born in 1930, before the
civil rights movement established greater freedoms and parity for
women and people of color in the United States.) What, in your experience,
lays the foundation for transformation of the individual and the
community out of hardship, violence and turmoil and toward peace
and prosperity, both in the home and in the community?
for transformation of an individual is different than for an entire
community. An individual can move, obtain a job, find a friend or
mentor and can begin life anew. But for a community to overcome
violence, turmoil, and hardship requires efforts of many people
over an extended period of time. Leadership is required and much
hard work and commitment by many to overcome major community ills.
from the Supreme Court, but I've never seen a busier retired person!
It is clear from the number of committees that you serve on, many
of which are nonprofit, that you have a strong sense of service
and calling. What would you say to the average person who wishes
to take a more active role in promoting peace and prosperity in
the world? How can s/he indeed be, as Gandhi said, "the change
they wish to see" when s/he may not know exactly where to begin?
I learned long
ago from a Stanford professor that a single, dedicated individual
can effect remarkable changes on a family, a community, or a nation.
Normally the work will begin with a good idea and a sense of dedication
and, in time great changes can be brought about. It is sometimes
the person at the bottom of the ladder who can best envision the
needed change. Anyone can begin work at the lowest level and with
dedication achieve remarkable results.
What is the
next stage of social and/or judicial reform that you believe is
important for the United States of America and/or the world at large?
In this country
I would like to do more to educate all our citizens, young and old,
about our courts and judicial systems, state and federal. We need
people to appreciate the necessity for an independent judiciary
— one which applies the Constitution and laws as they are written
and as they must, without fear of retribution from the legislative
and executive branches. Our nation's youth must be taught civics
and government so that they will grow up to be useful participants
a member of the Iraq Study Group, and participated in a deep, broad
analysis of U.S. policy in Iraq. Is there anything that you saw
or experienced in Iraq that gave you the most hope and optimism
for a positive outcome in the country?
As a member
of the Iraq Study Group I learned little that made me optimistic.
The situation in Iraq is dire.
What do you
think is the one of the most important things that Iraqis can do
for themselves and their country, and how can Americans best support
I hope the Iraqi
people can bring about laws and policies to reconcile the Shias
and the Sunnis and allow both to work and hold office and positions
in government. Laws to regulate the oil resources and permit fair
distribution of oil revenues to all the citizens would be helpful.
Has the President
established a Senior Advisor for Economic Reconstruction in Iraq,
as the Iraq Study Group Report called for? Have you seen progress
toward better organizing the reconstruction effort and better husbandry
of the funds that have been allocated?
I do not know
the answer to this question.
Afghanistan have a very different social structure than the U.S.,
particularly with regard to rights of the individual. Do you have
any comments on what kind of role that the Western world should
play in influencing traditional societies where people of a certain
gender, race and/or religious creed are prevented from fully participating
young people is our best hope of avoiding discrimination on the
basis of race, gender or religion.
In my interview
earlier this year with Dr. Gary Becker (Nobel Laureate, Economics),
Dr. Becker noted that individuals with knowledge and skills tend
to flee war-torn regions and migrate to more peaceful communities,
where land and life is more secure. Are you optimistic that the
recommendations from the Iraq Study Group can create a peaceful
country that will attract back the skilled, educated and motivated
for the rebuilding and reconstruction efforts of their own country?
As of now only
some of the Iraq Study Group recommendations are being carried out.
It is uncertain whether any course of action in Iraq can create
a peaceful nation at peace within and with its neighbors. It is
also uncertain when or if the better educated citizens will be motivated
to return to Iraq.
What do you
think is the single-most important challenge facing Americans today?
There are several
crucial challenges for the U. S. today. Reaching a consensus
on our action in Iraq is necessary. We cannot continue as we are.
We must address the problem in the U. S. of some 40 million
people without health insurance.
We must address global warming and ways to become energy independent.
you find your greatest source of optimism about the future of the
U.S. and our world?
basically good people and optimistic. Our people are our greatest
source of optimism.
heard of the Bill in the House of Representatives to establish a
U.S. Department of Peace? Would you care to comment on this bill?
It is backed by many of the world's spiritual leaders, including
Deepak Chopra, Marianne Williamson, and more. The bill proponents
state that a U.S. Department of Peace will give the best practices
of peacebuilding a seat at the table of power in Washington. As
the Peace Alliance chairperson, Marianne Williamson says, "What
a Department of Peace will do is give a more sophisticated analysis
of what constitutes peace, of what it would take to wage peace in
as meaningful and sophisticated a way as we now know how to wage
No. I have not
heard of the proposal.
Note: To learn more about the Bill to Establish a U.S. Department
of Peace, go to http://www.thepeacealliance.org.
Find out more about the Peace Alliance's September Walk for Peace
at the Calendar
section at NataliePace.com.
What do you
think is the key to success for any personal or professional venture?
A clear objective,
dedication and hard work.
again, Justice O'Connor, for participating in our series on Peace
Sandra Day O'Connor
once remarked that she hopes her tombstone will read, "Here
lies a good judge." In reality, however, Justice O'Connor's
achievements are far too numerous to list. She is a hard-working
person of integrity, a mother, a wife (married 55 years to husband,
John), the first woman to become a Supreme Court Justice, and one
of the most powerful and influential women in the world. If the
gods are willing, Justice Sandra Day O'Connor will continue to break
new ground and glass ceilings for many years to come.
Day O'Connor is an Associate Justice (Ret.) of the United States
Supreme Court. Sandra Day O'Connor was nominated by President Reagan
on July 7, 1981, and took the oath of office on Sept. 25, 1981.
She retired on January 31, 2006.
currently serves as Chancellor of the College of William and Mary
and on the Board of Trustees of the Rockefeller Foundation, the
Executive Board of the Central European and Eurasian Law Initiative,
the Advisory Board of the Smithsonian National Museum of Natural
History and the Advisory Committee of the American Society of International
Law, Judicial. She is an honorary member of the Advisory Committee
for the Judiciary Leadership Development Council, an honorary chair
of America's 400th Anniversary: Jamestown 2007, a co-chair
of the National Advisory Council of the Campaign for the Civic Mission
of Schools, a member of the Selection Committee of the Oklahoma
City National Memorial & Museum and a member of the Advisory
board of the Stanford Center on Ethics. She also serves on several
bodies of the American Bar Association. Whew! And, in 2006, she
was a member of the Iraq Study Group, which presented President
Bush with bipartisan analysis and recommendations for Iraq - which
was my reason for contacting her.
It Time to Move Out of REITs (Real Estate Investment Trusts)?
Pace. Includes a REITs
Stock Report Card.
REITs have been
one of the brightest stars in the stock market for the last seven
and a half years, but in the 2nd quarter of 2007, right
at the beginning of the implosion of the subprime mortgage lenders,
REITs burned out, even while the rest of the marketplace was breaking
through to new highs on a regular basis.
Segment Scorecard for the Second Quarter 2007
Thomson One Financial, Thomson Baseline
Who knew? Many
financial experts, including our sources. Back in May of 2005, we
began reporting that residential homebuilders were headed for a
decline, calling it a "burn
out sector." Since the date when I first warned
about them, the companies listed in that article - KB Home and Toll
Brothers -- have lost -48.5% and -43.5%, respectively (as of August
31, 2007). I also warned about subprime mortgage lenders back in
March in my Hot
News on Cool Stocks article, before New Century declared
bankruptcy. Click to read that article, from the archived March
2007 ezine, vol. 4, iss. 3.
So if you're
not reading the Hot News updates on a regular basis, now might be
a good time to kick your celebrity fanzine habit and start digesting
something that will keep you fiscally fit and beautiful. I update
the Hot News article twice a month. You can find out how best to
access and understand it by reading the FAQs
article under the Investing Edu section at NataliePace.com.
At the time
of my May 2005 article, Bruce Karatz, the CEO and Chairman of KB
Home, was still aglow, gushing that real estate was as strong as
ever and the future was so bright he had to wear shades, but, if
you followed the money trail, it told a much different story. Insiders
at KB Home and Toll Brothers, including Bruce Karatz himself, were
both selling shares in their companies to the tune of hundreds of
millions of dollars. Despite how surprised many of these home building
executives act today over the downturn, they were blown by the changing
winds as early as May of 2005 and taking their own windfall, to
protect their personal interests.
discerning reality from CEO cheerleading is not as easy as simply
following the insider trading. Sometimes insiders cash in because
they have almost everything tied up in the company - as Sheldon
Adelman, the Chairman and CEO of Las Vegas Sands Corp. did in 2005-2006.
Sometimes insiders sell for tax reasons or to fund their foundation,
like Bill Gates does every year to the tune of about $500 million.
So, what data
is valuable in determining when a hot sector is poised to cool off
and when a cool sector is heating up? It is always all about the
underlying fundamental economics of the business, which you can
ascertain best by using a little common sense.
anyone who owned real estate prior to 1990 knew that the real estate
boom from 1999-2006 was primarily fueled by low interest rates and
very unhealthy, aggressive, loose lending standards by a few of
the nation's subprime mortgage loan companies -- many of which have
since gone belly-up. (New Century Financial and Ameriquest are both
history.) Housing affordability has become increasingly impossible
for many buyers - especially over the last two years - and almost
impossible without the delightfully rock-bottom interest rates.
Almost every real estate veteran I know has at least one story of
someone putting a down payment for a house on a credit card -- something
that would have been completely impossible just a few years ago
when you had to borrow money from friends to pay off credit cards,
so that you looked like you were fiscally healthy.
mortgage-lending marketplace was so competitive, there was an ongoing
joke among experts that if you had a pulse, you could get a no down,
liar's loan and own property. It didn't take a genius to determine
that income wasn't increasing, that the cost of basic needs, like
housing, food and gas, were shooting to the moon and that more than
a few homeowners were using their home equity as an ATM machine.
Since the house
of cards was built on low interest rates, things were destined to
collapse when the Feds started increasing the Fed Fund rate, which
happened 17 times in a row beginning in June 2004 and ending in
August 2006 (when current Chairman Bernanke began pausing). Real
estate values had been ballooning at double and triple their typical
annual returns since 2000, so it took a few months for the effects
of higher interest rates to kick in.
You know the
rest of the story. Subprime mortgage lenders imploded. The Feds
and the President had to get involved, so lending standards tightened
and banks jacked up interest rates even more - to the point that
ARMs are now more expensive than fixed-rate loans. To make matters
more difficult, however, even homeowners with good credit are getting
caught in the squeeze of falling home values. If the value of the
home is near or below the amount owed, what lender is going to refinance
it, when the marketplace looks poised for further declines in real
estate? Even borrowers with good credit ratings are going to have
a more difficult time refinancing an ARM these days, which is why
mortgage lenders like Countrywide, are taking actions to make sure
they have the liquidity to make it through a very tough road ahead.
builders and mortgage lenders are definitely industries at risk
now and going forward, and the true test of those marketplaces is
only beginning. The Associated Press reports that there are still
another two million or so adjustable rate mortgage loans with obscenely
low introductory rates that will need to reset in the coming 12-18
months. Thus KB Home, Toll Brothers and Novastar Financial have
been and continue to be on my Cooling Off list, in the ongoing article,
Hot News on Cool Stocks. (Countrywide Financial, the nation's largest
mortgage lender, should be able to survive, though not without scars
and investor disappointments, unless the entire industry evanesces.)
But what about
REITs that specialize in office buildings, like Boston Properties
(NYSE: BXP) or retail shopping centers, like Macerich (MAC)? Will
they be affected by the problems affecting the residential real
estate community? Again, it pays to look at the fundamentals underlying
the markets of each industry.
at retail shopping centers, like Macerich, I started with an assumption
that if people are having trouble making their mortgage payments,
they're also going to be cutting back on eating out and buying clothes.
Since retail shopping centers are built upon the backs of restaurants
and clothing shops, a decline in consumer spending could negatively
impact the earnings of the shopping center. The Federal Open Market
Committee noted in the minutes from their June 2007 meeting that
consumer spending had slowed from its rapid pace earlier in the
A quick survey
of some retail shops, from Macy's to Liz Claiborne and Bebe, revealed
that retail sales, especially in same store shops, have declined
in many of the nation's best-known brands this year from last. Each
of the following companies reported declining sales in their most
recent earnings report.
(NYSE: LIZ): Net sales for the six months of 2007 were $2.284 billion,
a decrease of 0.5% from the comparable 2006 period.
BEBE): Same store sales for the thirteen-week period ended July
7, 2007 decreased 5.7% compared to an increase of 3.5% in the prior
M): Sales in the second quarter totaled $5.892 billion, a decrease
of 1.7 percent compared to sales of $5.995 billion in the same period
last year. On a same-store basis, Macy's, Inc.'s second quarter
sales were down 2.6 percent.
restaurants have seen less traffic this month. Forty percent of
operators reported a traffic decline in July, according to the National
Restaurant Association. It's too early to call this a contraction,
but the trend in both restaurants and retail is headed in the direction
we'd anticipate - south - given the strain on the consumer wallet
these days. So, the outlook for the retail mall REIT industry (and
again, I'm usually the early bird in terms of adding up the warning
signs), by my analysis, is that the industry is on the brink of
a cooling off period.
Restaurant Association's Restaurant Performance Index
Greater than 100 = Expansion; Values Less than 100 = Contraction
Now, if we turn
to the company itself, the same trend - south - is showing up as
well. Macerich, the owner of many marquis shopping experiences,
including the Scottsdale Fashion Mall and the Santa Monica Place,
posted a big decline in net income in the last quarter. For the
six months ended June 30, 2007, net income fell by half, to $16.0
million compared to $33.1 million for the six months ended June
30, 2006. With a declining trend in net income and an alarmingly
high price to earnings ratio of 89.30, the only question is whether
or not one should sell now or wait until January 2008, after the
annual run-up of the stock markets.
benefit from the general larger trend in the marketplace - the Santa
Rally -- a phenomenon that tends to especially benefit retail? There
is no crystal ball on this. If Macerich flies under the radar of
Wall Street investors, it could easily benefit from the annual fourth
quarter market rally. If investors get skittish over REITs or corporations
with higher price to earnings ratios, or if the fall-off on Macerich's
net income captures headlines, the share price will fall. Recently,
Forbes.com listed Macerich as one of five companies with excessively
high price to earnings ratios.
Since I first
featured Macerich in May of 2003, when it was trading at $33/share,
taking it off of my Hot News list at $81.22 seems like the right
thing to do. I know that chances are good the price will be higher
at the end of the year, but the risk isn't worth it when the share
price is up 146% -- especially given the fall-off in price over
the last six months.
On the other
hand, Boston Properties -- and office building REITs in general
-- is more difficult to call. The price to earnings ratio of Boston
Property is fairly low. The profit margins are extremely robust
at 66.30%. Office building occupancy is 90-100% in most of the markets
the company is involved in. And certainly Mortimer Zuckerman, the
Editor in Chief of the U.S. News and World Report as well as the
non-executive chairman of Boston Properties, is a well-regarded,
well-respected, very bright individual with deep wisdom and experience
ranging over the course of seven decades of living. His reputation
and network of friends is undoubtedly keeping Boston Properties
at the forefront of A-list real estate deal making. These are all
|The Bank of America Tower at One
Bryant Park: the world's most environmentally responsible high-rise
office building. (© Durst.org 2006)
Owners of skyscrapers
will do better than owners of homes over the next year or so because
their customers - corporations -- are still benefiting from increasing
GDP, high worker productivity (the U.S.
ranks #2 in the world), increasing earnings and profit
margins, high cash flows and all of this without having to give
their employees a raise. Real median earnings of both men and women
who worked full time, year-round declined between 2005 and 2006.
The median earnings for men fell 1.1 percent to $42,300; for women,
the corresponding numbers were 1.2 percent and $32,500 (source:
US Census Bureau).
Once this mix
changes - if salaries increase, earnings drop, productivity swoons
and/or GDP stalls out - the office building owners will have to
compete with one another by lowering rates and offering greater
incentives in order to keep their tenants. Vacancy rates during
the 2000-2002 recession were a challenge for this industry, particularly
in San Francisco and New York City. In other words, the office builders
may have another 6-18 months of growth ahead before they face too
In short, I
wouldn't be moving into a new REIT at this juncture, and I'd be
moving out of everything in this space, with the exception of office
buildings - while setting my appointment book to look at the office
building REITs again in January 2008 for an updated analysis of
the larger economy. For a side-by-side comparison of the financials
of a select group of REITs, including Boston Properties, Macerich,
KB Home and Toll Brothers, click on my REITs
Stock Report Card.
and National Health Investors are listed in the Hot News on Cool
Stocks list this month. Boston Properties was added to the Watch
NataliePace.com does not act or operate like a broker. We are a
media and publishing company. This article is intended to provide
the news, information and education individual investors need to
have 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 consult an experienced, reputable
financial professional and consider your long-term goals and strategies
before buying or selling any security.
DISCLAIMER: Information has been obtained from sources believed
to be reliable however NataliePace.com 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.
Real Estate Blues:
Red-Hot to Bankrupt.
share their pain and sound solutions with Steve Dietrich, president
of Financial Research Group. Reprint of online chat from August
we featured an article by Steve Dietrich, outlining 6 Ways to Protect
Yourself from Falling Into Foreclosure. If you haven't read that
yet, click on Panic
at the Sub Prime Disco, or go to the article in the
August archived ezine, vol. 4, iss. 8.
I'm not sure how to boil it down yet…
Tell us where it hurts.
easy! We have a property in Phoenix that was a lease-option with
a negative-amortization mortgage. The tenant moved out without notice.
The amount owed has increased from $210,300 to $218,000. The market
has tanked. The property cannot be re-leased because no one, sensibly,
will commit to a purchase price, and the manager has had no luck
renting it. I cannot get refinancing because the property value
is not there, and the debt on the property is increasing. Any ideas?
The first question
is for your attorney. Are you personally liable for the loan on
the building? If you are, it changes things considerably. Where
the market value is less than the loan, you are spending money to
maintain an "option" to keep the place and protect your
We are liable,
and, sigh, that's what I thought. One can always hope for a better
The first steps
would be to try to find out who really owns your loan and if there
is any ability to negotiate. The major problem with many of today's
loans is that they are owned in pieces.
I have been
talking with the lender, but they're having trouble with the drop
in value, too. It went from $267,000 appraised on May 2006 to $230,000
You say you
are liable and just to be sure the key issue is the ability of the
lender to get a deficiency judgment against you if they take the
property back. We are into a legal area so you need legal help.
Many California folks are surprised that the laws in states differ.
I have only a little knowledge of the Phoenix market, but my impression
is that it is overbuilt and also that many of the new homes are
occupied by soon to be unemployed construction workers.
The most fundamental
approach to dealing with falling values is to act. However, in this
case, there might be some relief coming from the government. Despite
what Cramer has to say this "crisis" came not from the
government but from the Wall Street wizards.
I think that
those who expect the Fed to solve this issue are wishing. Priority
one is to keep interest rates high enough to prevent inflation and
to keep foreign investors interested in treasury obligations. The
plight of homeowners is low on the list. The first question illustrates
the problem, somewhere a lender is holding a loan that is secured
by property worth considerably less in liquidation. If the lender
is smart, they would accept the keys in full payment.
from Natalie: Can you afford to rent the Phoenix place for less
than your mortgage? Steve, if he can hold out for 4-5 years, do
you think he'll be glad that he bit the bullet? Will the markets
recover and reward him in the long term? I mean the average annual
real estate gains are 6.7% per year. If you buy at the top, you
may have a longer recovery cycle, but time does work in your favor.
You need a rate
of appreciation that is greater than the deficit of revenue costs
just to break even.
keeps screaming in my mind about this dilemma.
The good thing
about real estate investing is that there are no margin calls until
the loan comes due for refinancing.
I don't have
an easy answer re: continuing to pay the difference between possible
rent and payments. I say possible rent because it appears that it's
proving to be very difficult to rent the property.
No one knows
why. It's been empty since May 6th.
I would be tempted
to wait for 6 months to see if there is some direction. However,
there are a lot of unresolved problems out there far beyond the
real estate industry that could have a significant impact.
rate, by the way, went to 8.25% and can rise .125/month, based on
an index I don't recall now, with a cap of 12%. Escrow is $130/month.
In some aspects,
it is a game of musical chairs where there are more chairs than
people. In one of the recent group discussions we talked about the
special difficulties with real estate. When you build a house it
is not a consumable product but rather better thought of as a machine
that will deliver housing to the market for the next 30-60 years.
rate is going to make it very difficult to compete with buyers who
are getting in at a considerably lower cost basis and and perhaps
a somewhat lower loan rate.
I own shares
in a REIT that has done very well in the past. During the last six
months, it has struggled. Based on the commercial real estate market,
what do you see for the general direction and for REITs as an investment?
should read Paul
article from the August ezine. REITS were the worst performing
sector last quarter, by a lot. I believe the industry was off over
10%. We first warned of the problem back in April of 2005, when
there were hundreds of millions of dollars worth of stock being
sold by the CEOs of KB Home and Toll Brothers. You can check out
that article from the archived ezines, vol. 2, iss. 5. The article
is called, "Rupert
Nobel Laureates and Top Real Estate CEOs. Find Out Where They Are
Investing," and included four hot markets and five
that were burned out. REITs were one of the burnout industries listed,
and KB Home and Toll Brothers are still on our Cooling
Off list, with losses of 48.5% and 43.5%, respectively,
since we first featured that article.
Steve: I am
not a stock or REIT guy, but what we are seeing in the investment
real estate market is a shift in cap rates and a decrease in competition
among buyers. We do some work with long term clients who are in
the market at the present time and as a result of this probably
20% of the emails I get are notices that the seller has dropped
the price. If this translates to REIT values, it is a time for caution.
However, some REITs may have significantly undervalued assets. Unlike
1990, there is not a glut of office space, which resulted in the
loss of 75% of the asset value for many large buildings.
that use financing are also going to be hit with higher costs.
note: a cap rate is income/price.
as well as Natalie's were what I was looking for and kind of what
with stocks, you have to ask yourself if this is in your trading
portfolio or the long-term portfolio. For the long term, dollar
cost averaging works pretty well -- you are buying in at lower rates
when the price goes down, so you can afford to look to the long
term, without too much concern over the year by year fluctuation,
although I'd be more concerned about home builders than I would
be about REITs like Boston Properties that have office space. If
the REITs are in your trading portfolio, buy low; sell high works
every time -- if you've still got profits to take at this juncture.
These are just a few of the things to consider with your certified
This is being
done in an IRA Rollover portfolio with long-term plans.
the good news is that you shouldn't incur a tax liability if you
sell in your qualified tax-exempt IRA. There is certainly nothing
wrong with taking profits in sectors that have had a great run up,
and redistributing it toward sectors that are poised to perform
in the future. REITs were the darling industry from 2000 - 2005.
We'll have Kelley Wright, a great Blue Chip stock picker in the
chat room in September (check the Calendar
section for the date), so that you can ask him his opinion on which
sectors he is interested in going forward. My Hot News on Cool Stocks
article (ongoing) has been heavy on technology, media, Internet
technology and alternative energy, and those sectors have done very
well for us over the past two years.
Steve: I would
also add that we are probably adjusting our offer on the most secure
commercial properties downward by 5-10% as a result of market conditions.
We are not using debt so we have suddenly become a much more desirable
How can we
best manage our real estate portfolios if we have equity in our
homes and all of our neighbors are in foreclosure?
My feeling is
that the loan market has been vastly under-priced in terms of risk.
Added to this is the lure of teaser rates. What Wall Street discovered
is that there is real risk in a 90% loan to a buyer who has little
hope of making payments after the tease is gone. The first step
is to secure long term financing at a fixed rate, if you intend
to stay in your home. Second is to sit on the sideline for a little
while, building liquidity. Third is to consider investing with the
caveat that the dead cat bounce also happens in real estate. Use
the same wisdom that brings success in the stock market to the real
estate - patience + research.
I have fixed
rates on all my properties. I did it traditional. However, the buyer's
market is sucking the equity out of the properties and due to the
decrease in value, my equity is being drained. Now that the interest
is going to 8% that will stop buyers from purchasing.
maintenance and insurance are a big bite out of the homeowner's
budget. Much of the current expansion of home ownership was the
result of low interest rates. The use of 90+% financing and variable
rate loans with teaser rates indicates that many buyers are both
short on cash for a down payment and income to service a fixed rate
loan. Thus, if interest rates increase, the amount that can be borrowed
with the same debt service decreases.
It was widely
reported that Wells Fargo had committed to 8% on the jumbo fixed
in August 2007, but today's rates on their website only show 7.6%.
(The 3-year Jumbo ARM is 8%!) Does it take a few days for the 8%
rate to be enacted company-wide, or have they retreated or were
the news sources inaccurate?
a leader in raising prices) went for the highest price. The market
did not follow all the way, so like an airline that tried to raise
prices, it fell back some, but still well above where they were.
Instead of getting flack for raising rates they get thanks for dropping
thoughts on when the market might cycle upward again based on past
I am hesitant
to offer a guess. The "good news" is that the excess supply
is primarily in residential and we managed to spread the losses
to domestic and foreign financial investors. That is unlike the
90's blowout that had gross oversupplies of residential and
office and, to some extent, retail. There is some well-founded
concern that cap rates on commercial properties are very low historically.
I think our challenges are very different today. We are in the 10th
year since Osama Bin Laden declared war on us. China can upset the
economy at will, and we are evermore dependent on foreign oil. Treasury
rates need to stay at or above these rates to keep foreign investors
in treasury obligations.
From a social standpoint, the events leading up to the housing bubble
of today are highly desirable in that we have produced a lot of
housing over the past five years. It will be here for another 50
years and will help keep housing prices down.
It probably took California housing prices from 1992 to around 1999-2000
to recover to their 1991 levels. (Ed's Note: The 1990s were a horrible
time for real estate in Southern California.
I want to
emphasize the importance of getting sound legal and tax advice when
considering various alternatives.
Legal advice, preferably from someone with experience in working
on problem loans, is essential, it is not enough to just have a
broker working on approval of a short sale.
Another VERY IMPORTANT CONSIDERATION IS THAT, as a general rule,
forgiveness of debt (or foreclosure) is income, offset by
the tax basis of the property transferred to the lender. This is
a complex issue that may be modified by new legislation.
The oversimplified example of this is that - you bought a
home for $400,000 in 2000 with a $360,000 loan and $40,000 cash.
By 2005, the home was worth $600,000 and you refinanced for
$540,000, using the $180,000 to payoff various debts (including
the down payment borrowed from the in-laws) and upgrade your
lifestyle. Suddenly the home is worth only $500,000 or perhaps even
less so you mail the keys to the lender, leaving a chilled bottle
of chardonnay as you depart. In addition to thanks from the lender
you receive a 1099 for $540,000. Much of this may be offset
by your cost but you are also likely to have a significant amount
of income to recognize and no cash from the disposition.
I have spent most of the last 30+ years working on and advising
clients on commercial development. Many and perhaps most developers
and investors have a remarkable resemblance to today's homeowners.
If there's a lender who will make a land loan, pre-development loan
or infrastructure loan, there's a developer who will start.
In the early days the formula was simple, if you did not have
a takeout loan for an office building, or anchor leases for the
retail, the construction lender did not want to talk to you. If
you did not have tenants, the long term lender would not make a
commitment, so the developer had to "find" the market - not through
appraiser's estimates of rent and absorption, but from real leases
and letters of intent. Often the large tenants provided great wisdom
to the design process. Today, in an industry awash in cash
(at least in July) the ultimate consumer's voice is heard only from
One of the frustrations in teaching MBA's about real estate development
was that they would do great work in their classes and then be blinded
by the red mist of their classmates making money on homes. In a
world where homes are going up in value by 15%-25% per year AND
buyers are paying over listed prices on the first day the listing
appears such old fashioned concepts as Long Term Value, debt service
coverage, liquidity and such are for losers.
Home buyers, like too many entrepreneurs of the dot com age ignored
Prof. Cockrum's most fundamental lesson -- never run out of cash.
If our MBA's from some of the best schools are drinking the Kool-Aid
we can hardly fault the hard working inner city couple who suddenly
sees the American Dream within reach. Add to this the chorus of
real estate brokers, mortgage brokers, lenders, planted articles
and such which discourage any serious analysis. With seller assistance,
no-tell loans and 20% price increases and you too can live free
was just too sweet a deal to ignore.
For those who would listen, some of those in government, the academic
community and even some financial types have been warning that this
was coming for a long time.
The solution is, I believe, not so much in educating the buyer as
it is in educating the ultimate investor and the banks that supported
the investors. Perhaps the greatest tragedy of all of this is that
so many of the core families who helped to hold our inner cities
together will be set back by this debacle, while, had they been
encouraged to save for a few more years, they could have purchased
an affordable home and lived the dream.
For at least a year and probably more, many housing experts were
warning that subprime loans were a disaster waiting to happen. They
were described as "neutron loans" = buyer disappears but the house
remains. The high return on these things led those on the
investment side who knew nothing about the housing market to ignore
the advice of their housing specialists and to join the other lemmings
going over the cliff.
FRG Development and Consulting Development
Santa Monica CA / Santa Ynez Valley CA
Sure Shots from Self-Proclaimed Gurus, and Other Ways to Lose Money.
reprint of our premium subscriber chat on August 29, 2007 with Natalie
start with debunking some myths. The markets are still up on the
Gains 17 &
+21% & +5.4%
+13% & +4.3%
+14% & +2%
It's been painful watching the pullback. Are you still of the mindset
that people should hold?
can give information, but your Certified Financial Planner has to
help you decide what's best for you, based upon your timeline and
goals. Having said that, there are a number of facts to consider,
many of which are addressed in the "September
Back To School Stock Sales"
article this month. Listed below there are 10 factors, which are
historically present in the markets, even today with the subprime
problem, many of which indicate that January 2008 will offer a better
selling opportunity for most investors than August or September.
Also, bear in mind that when we are discussing selling, this is
for your trading portfolio, not your nest egg. Your nest egg is
all about long-term planning, compounding and tax considerations,
whereas the Stocks on Steroids or trading portfolio (which is going
to be a smaller percentage of your liquid assets than the nest egg)
is about buy low; sell high for maximum gain.
PHENONMENON that is covered in the "Back
To School Stock Sales"
to School Stock Sales in September.
Caps for Performance.
Caps for Stability.
Traded Funds over Mutual Funds.
and Asset Allocation.
People Make Better Products Faster Cheaper.
Economics of Freedom.
in the August Mid-month update, which was available online August
14th through September 4th (at NataliePace.com
under the Online Magazines link), I stated:
on the front page of the NY Times read: "Small Investors Feel Less
Pain as Stocks Slide: Professionals are hit hardest by turmoil."
The writer went on to compare July 2007 to the technology crash
of 2000, writing, "The wild swings in the stock market over the
last few weeks have reawakened memories of the technology crash
of 2000 in which many small investors lost their savings." Wow.
The comparison couldn't be farther from the truth, but I suppose
the hyperbole serves to sell papers. The technology crash of 2000
wiped out over 60% of a person's technology holdings -- and NASDAQ
is still down over 45% from its March 2000 high. (See the black
NASDAQ trend line in the chart below.) Whereas, all of the major
indices in 2007 are still up on the year, even with the volatility.
I know that
if I had sold in May, I would be much better off today…
Selling in May
and going away is one of the few Wall Street aphorisms that I don't
agree with; I prefer selling in January. And each phrase listed
above has an important paragraph included in the article, so be
sure to read it! Now, as to why you feel that you should have sold
in May, please tell me some specifics. I'm assuming that you are
talking about your short term trading portfolio and not the long
term nest egg (which works better when you let it ride through fluctuations)…
And in terms of your trading portfolio, if the year ends up great,
you'll be very glad that you did not sell in May!
I feel as
though I'm getting a special treat here, having one-on-one attention!
You are! That
is the beauty of the premium subscription. Enjoy it!
some of the things you look for when you are buying and selling
Have you looked
at my stock report cards? If not, I'd recommend starting by reading
a few of the headline articles that I've written this year. Of particular
interest would be the articles on subprime
(from May) and World
Water (from April). I'm sure there are other articles
of interest, I'm just going from the two articles that have proven
to be very KEY in 2007 to date!
Hits the Mainstream!
By Natalie Pace. Includes a Solar Energy Stock Report Card and one
little company with a big backlog of orders. Archived ezine, vol.
4, iss. 4.
Prime Time. By Natalie Pace. A report on the mortgage
lending business, including a Subprime Stock Report Card. Archived
ezine, vol. 4, iss. 5.
I did quite
well in the markets earlier in the year, and then I sold and bought
some more that I didn't know much about. I got caught in the downturn
of the markets. Who knew!
Well, when you
come to my Living
the Rich Life Retreat in January, you'll get a sense
of who knows, and then you'll know! There are many predictable things
about the stock market that are very under-reported. Having said
that, I don't like buying January to July, unless there is an amazing
story going on (as there was with World Water this year and Disney
in 2006 and MySpace and Las Vegas Sands in 2005 and Google in 2004).
September is the back to school stock sales, which is a month that
I do enjoy shopping for stocks. Just that tidbit alone could have
saved you from what you are feeling right now. However, now that
you are HERE with these stocks that are down a bit, let's take a
look at the strategy you might employ going forward. You'll need
to give me a specific or two. Where does it hurt most?
I have been
trying to become more familiar with your site. The stock report
cards I was only looking at occasionally and when the stock was
already up, I decided I had probably missed the run up. Now I will
be checking more diligently and keeping track of things.
Well, the good
news is that the Hot News on Cool Stocks list does keep track of
the companies we feature, listing pertinent news and highlighting
the company if it returns to buying range or runs up such a good
profit that it is worth selling… Also, the articles are key because
you'll start getting a sense of the logic I employ to pick the particular
company that I am picking as the "leader" of that particular
sector, and why I think the company and the industry are going to
increase in value going forward.
With the subprime
sector, it was the opposite. I picked a losing sector, told people
to avoid it, and picked the king of the losers to highlight as one
to really avoid. The month prior, in March 2007, I had warned people
of New Century Financial, before they declared bankruptcy, in the
Hot News article, saying:
lenders took a big hit this month, when New Century Financial Corp.
reported on February 7, 2007 that the company would have to restate
earnings due to losses on subprime loans. Shareholders have filed
suit against the company and liquidity looks like a big issue, so
steer clear of New Century, unless you are a professional who understands
how to maneuver in very short, volatile windows.
See the complete
Sell on the "China's
Black Tuesday" Scare. by Natalie Pace. Archived
ezine, vol. 4, iss. 3.
was telling me when to buy and sell, or in this case not to. I do
not want to do that anymore, which is why I am trying to learn more.
Let's take a
look specifically at one or two companies that you are currently
concerned about in your portfolio, okay?
I have Pinetree
Capital (uranium) at $11 plus and now at $4 plus. As well as Pinetree,
I have some Moly stocks, such as AUA and ROK, Series sector, I have
I show a symbol
of PNPFF for Pinetree Capital. The company is based out of Toronto,
trading off the boards in the U.S. and is at $3.77 per share, right?
It was at
$4.23 an hour ago!
This is a great
stock to learn on. The first thing you should always do when you
are considering a company is start by going to NataliePace.com and
entering the symbol of the company in the box that says, Company
Research. That takes you to one of my favorite stock pages on MSN.com.
So, the first thing that I noticed about Pinetree is that it has
5 symbols, which is a big red flag. In the US, five symbols for
an individual company typically means something is very risky about
the company, the company might have missed filing quarterly reports
or might even be bankrupt. (Mutual funds have five symbols also.)
Whatever the 5 characters means in this instance, it means do 10
times the amount of research before investing.
Then I looked
at the market capitalization to see what the story was. It is valued
at $375 million, which is a very small company to be publicly traded,
and because the price is so low, I looked around to see if it was
traded on one of the exchanges (NASDAQ or NYSE) or trading off the
boards. Right underneath the name of the company, you can see that
Pinetree is traded OTC, which is off the boards. Companies that
are not traded on a major stock exchange are VERY, VERY HIGH RISK!
You have to do 1000 times the research before buying in. Already
I've noticed two HUGE red flags about this company… And that is
within the first five seconds. They would have to have an INCREDIBLE
story to keep my attention at this point.
What are the symbols?
is your company - Pinetree. I can tell that it is the same because
it is based out of Toronto, and one of the things that this capital
investment company does is to invest in uranium.
Yes, it is
a uranium company.
as to why so many people think uranium is hot. I mean it is radioactive,
but not a hot stock! In the U.S. there hasn't been a new nuclear
power plant built since the 70s, and they still haven't figured
out how to safely dispose of the radioactive waste. Additionally,
your company is not simply in the uranium business, which is what
you were under the impression that it was doing. It is in fact a
company that invests in many other companies, including companies
that are specializing in uranium, thus the name - Pinetree Capital.
I found out this information by clicking on the Company Report link
on the MoneyCentral.msn.com stock page for Pinetree.
going to sell it now! Thanks!
Not so fast!
If I were an owner of this stock, I'd now go to the company website
and check out the most recent financial report. I went to PinetreeCapital.com
and noticed that the company's financial information was last updated
on June 30, 2007 and that the most recent earnings report had a
fairly large loss for this size of a company. That's not so good
either. Then when I actually look at the 3-page earnings release,
I understand why it is trading off the boards in the U.S. The information
is quite basic, and not very professional. You could compare this
with the earnings reports and press releases of other foreign-based
companies, like Suntech Power Holdings (STP) or SOHU (SOHU), which
are both based in mainland China, but are trading on the New York
Stock Exchange and NASDAQ respectively.
So now should
am not fond of selling anything in August, especially after the
markets have tumbled a bit, because you still have the Santa Rally
waiting in the wings. Even if you have a dog, it can go up in value
between now and January 2008 - unless, of course, the company is
under such distress that it is going to go bankrupt. In the case
of companies that are trading off the boards and have a market capitalization
under $500 million, there aren't a lot of investors out there to
buy your stocks from you, so you have to get aware of what campaigns
might be out there to attract investors.
In short, I'm
not sure that you should sell or that you shouldn't sell. (I'd be
tempted to try to wait and recoup my investment, but only if I thought
the company might be attractive to others in the next few months.)
However, I am positive that you need to do a lot more research into
the company to determine what you should do. You might begin by
calling the person who recommended it to you and see if they are
still recommending it to a lot of other people. (If they are, those
people might start buying and push the price up a bit, so that you
can sell it for a few cents or dollars higher than today's price.)
See if you can find out why the company lost so much in the 2nd
quarter and why the website financials page hasn't been updated
since June 30th.
There are too
many questions to have a good degree of comfort about this investment.
Ideally, you want to answer to all of these issues BEFORE you invest.
When you learn how to use my investment recipe and the Stock Report
Cards (which I teach at the Living the Rich Life Retreat), it makes
knowing when to sell and take your profits MUCH EASIER because you
are reasonably assured that you have purchased a sound, quality
company that is run by sound, quality management with a sound, quality
product that people enjoy buying AND that you have purchased the
stock at a reasonable price. When all of those factors line up,
you don't have to be as concerned about market fluctuations because
chances are that over time you've made a good investment that will
I really appreciate this opportunity, and I can't wait to see you
at the retreat in January!
I love having this premium subscription for this very purpose. It
really can be a one-on-one opportunity! Have a great week. Good
luck in your research and decision-making!
If you are
interested in joining me at my Living
the Rich Life Retreat in January, act now! We are offering half
off the retreat price now through September 15, 2007 ONLY. Get more
information on the Living the Rich Life banner ad, located on the
home page at NataliePace.com. Email Heather@NataliePace.com
NOW with HALF OFF in the subject line, if you are interested in
registering for the retreat now.
FYI: Below I'm
listing a recent press release from the Federal Reserve, wherein
they seem to be in the mood to lower the Fed funds rate soon. When
the Feds lower interest rate benchmark, many investors in the stock
market get excited. That is not a guarantee that the Feds will lower
the rate or that the markets will react favorably, but it is a historic
trend that market-philes might gain from knowing about. And, from
the action that Chairman Bernanke and President Bush took over the
last week to assure investors, it is clear that both are committed
to making sure the coming quarter is a strong one for the markets.
Board Press Release
Date: August 17, 2007
market conditions have deteriorated, and tighter credit conditions
and increased uncertainty have the potential to restrain economic
growth going forward. In these circumstances, although recent data
suggest that the economy has continued to expand at a moderate pace,
the Federal Open Market Committee judges that the downside risks
to growth have increased appreciably. The Committee is monitoring
the situation and is prepared to act as needed to mitigate the adverse
effects on the economy arising from the disruptions in financial
favor of the policy announcement were: Ben S. Bernanke, Chairman;
Timothy F. Geithner, Vice Chairman; Richard W. Fisher; Thomas M.
Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin;
Michael H. Moskow; Eric Rosengren; and Kevin M. Warsh.
Welcome to the BIG
Selengut, author of The
Brainwashing of the American investor.
correction is the same, a normal downturn in one of the Markets
where we invest. There has never been a correction that has not
proven to be an investment opportunity. You can be confident that
the Federal Reserve, as hypnotized as it is with keeping inflation
under control, is not going to cause either a financial panic or
a prolonged recession with tight money and high interest rate policies.
While everything is down in price, as it is now, there is little
to worry about. When the going gets tough, the tough go shopping.
is different, the result of various economic and/or political circumstances
that create the need for adjustments in the financial markets. In
this case, an overheated real estate market has finally taken a
breather; an overdose of bad judgment among lending institutions
is producing a major hangover; and an overheated Stock Market, propelled
by demand for speculative derivative securities (ETFs), and Hedge
Funds, is finally falling back to more earthly levels.
of corrections is one of the few certainties of the financial markets,
a reality that separates the men from the boys, if you will. If
you fixate on your portfolio Market Value during a correction, you
will just give yourself a headache, or worse. None of the fundamental
qualities that made your securities "Investment Grade" just three
months ago---when your Market Value was at an All Time High---have
changed. No interest payments or dividends have been cut. Only the
prices have changed, to preserve the reality of things---and in
both of our markets. Welcome to the Big Buy Low!
are beautiful things, but having two of them going on at the same
time is like a trip to Fantasy Land. Theoretically, even technically
I'm told, corrections adjust prices to their actual value or "support
levels". In reality, it's much easier than that. Prices go down
because of speculator reactions to expectations of news, speculator
reactions to actual news, and investor profit taking. The two former
"becauses" are more potent than ever before because there is more
self-directed money out there than ever before. And therein lies
the core of correctional beauty! Mutual Fund unit holders rarely
take profits but often take losses. Additionally, the new breed
of Index Fund Speculators is ready for a reality smack up alongside
the head. Thus, new investment opportunities are abundant!
Here's a list
of ten things to think about or to do during corrections:
1. First of
all, don't beat yourself up by looking at your account Market Value.
You don't live in a vacuum and you are not immune to market price
variations. That is why we only buy the highest quality securities
in the first place and stick with a well-defined Asset Allocation
plan. Look for ways to add to your portfolios---that's what the
smart guys are doing.
2. Take a look
at the past. There has never been a correction that has not proven
to be a buying opportunity, in spite of the media hype that this
one is special. When they are broad, fast, and deep, the rally that
follows is normally broad, fast and steep. Get ready to party.
3. The "Smart
Cash" that was accumulating during the last rally---the one that
ended abruptly in May, should be put back to work, and probably
will be too soon. That's also normal. There are no crystal balls,
and no place for hindsight in an investment strategy. Buying too
soon, in the right portfolio percentage, is nearly as important
to long-term investment success as selling too soon is during rallies.
4. Take a look
at the future. Nope, you can't tell when the rally will come or
how long it will last. If you are buying quality securities now
(as you certainly should be) you will be able to love the rally
even more than you did the last time---as you take yet another round
of profits. Smiles broaden with each new realized gain, especially
when most Wall Streeters are still just scratchin' their heads
5. As (or if)
the correction continues, buy more slowly as opposed to more quickly,
and establish new positions incompletely. Hope for a short and steep
decline, but prepare for a long one. There's more to "Shop at The
Gap" than meets the eye, and you may run out of cash well before
the new rally begins. Cash flow is king, so take smaller profits
sooner than usual so long as there are abundant buying opportunities.
6. Your understanding
and use of the Smart Cash concept has proven the wisdom of The Investor's
Creed. You should be out of cash while the market is still correcting---it
gets less scary each time. As long your cash flow continues unabated,
the change in market value is merely a perceptual issue.
7. Note that
your Working Capital is still growing, in spite of falling prices,
and examine your holdings for opportunities to average down on cost
per share or to increase your yield on fixed income securities.
Examine both fundamentals and price, lean hard on your experience,
and don't force the issue.
new buying opportunities using a consistent set of rules, rally
or correction. That way you will always know which of the two you
are dealing with in spite of what the Wall Street propaganda mill
spits out. Focus on value stocks; it's just easier, as well as being
less risky, and better for your peace of mind.
9. Examine your
portfolio's performance: with your asset allocation and investment
objectives clearly in focus; in terms of market and interest rate
cycles as opposed to calendar Quarters (never do that) and Years;
and only with the use of the Working Capital Model, because it allows
for your personal asset allocation. Remember, there is really no
single index number to use for comparison purposes with a properly
designed value portfolio.
10. So long
as everything is down, there is nothing to worry about. Downgraded
(or simply lazy) portfolio holdings should not be discarded during
general or group specific weakness. Unless of course, you don't
have the courage to get rid of them during rallies---also general
or sector specific (sic).
(of all types) will vary in depth and duration, and both characteristics
are clearly visible only in institutional grade rear view mirrors.
The short and deep ones are most lovable; the long and slow ones
are more difficult to deal with. Most recent corrections have been
short (August and September, '05; April though June, '06) and difficult
to take advantage of with Mutual Funds. So if you over-think the
environment or over-cook the research, you'll miss the party. Unlike
many things in life, Stock Market realities need to be dealt with
quickly, decisively, and with zero hindsight. Because amid all of
the uncertainty, there is one indisputable fact that reads equally
well in either market direction: there has never been a correction-rally
that has not succumbed to the next rally-correction.
If you were
head scratching on Smart Cash, Working Capital, or The Investor's
Creed, it's time to order the newly revised edition of Brainwashing.
Portfolio Management since 1979
Author of: The
Brainwashing of the American Investor: The Book that Wall Street
Does Not Want YOU to Read, and A Millionaire's Secret Investment
The September Back
to School Stock Sales and Other Wall Street Secrets.
Now that you're
getting a feel for the individual company, I'm going to introduce
a few ways of gauging the climate of the overall marketplace. There
is a saying, " A rising tide lifts all ships." In 1999,
you could have thrown a dart on a wall full of stock names and come
up with a winner. The same was true in 2003 (and many other pre-election
years.) Historical trends are generally reliable, but not foolproof,
so don't ever go all-in on them! It will still pay to do your research
and focus on the 3-ingredient investment recipe: start with what
you know, pick leader in the sector, and buy low; sell high!
I would add
that a sinking tide grounds all ships as well. It is very hard for
most companies to buck the trend of the general stock market. Few
young technology companies, outside of Opsware and Google, survived
the 2000-2002 Internet Technology crash. eToys crashed and burned,
as did many other brands that seemed destined to soar pre-Y2K, when
we worried that malls would become a thing of the past. (Instead,
malls became walking promenades - people became even more social!)
No one has a
crystal ball on when the low and high of the markets will occur.
Past performance is no guarantee of future behavior. But there are
a few historical trends that it pays to know about, which I've outlined
Rally. Over 50% of the stock market gains each year
are made in the last quarter. Thus, it often pays to wait to
sell until December or January, even if you are tempted to sell
earlier. Additionally, September, the worst performing month
each year, can be a great time to buy in anticipation of the
seasonally strong October, November and December. (This is how
I made over 200% gains in 2001 -- a dismal, down stock market
year -- by buying during the Back To School Stock Sales in September
and selling at the end of the Santa Rally in late December!)
Santa Rally trend didn't work for many subprime mortgage investors
in 2007, and that is an important consideration to consider: is
there a time when you should sell during the summer doldrums lows?
The subprime lenders took a big hit in April of 2007, and the
amount of foreclosures in this market began increasing at a devastating
rate. By May of 2007, many of the stocks in the subprime mortgage
industry had lost most of their value, but it was still a good
idea to cut losses by selling as quickly as possible, rather than
hope that the Santa Rally would inflate new optimism and investors
in the sector. New Century Financial bit the dust in April 2007.
Novastar Financial did a reverse stock split in July 2007. Every
four shares of Novastar common stock were changed into one share
of common stock. (Reverse splits are typically a sign that the
company is in great distress and trying to avoid a delisting of
the stock. The New York Stock Exchange and NASDAQ have share price
requirements to remain listed, amount other qualifying events.)
So, as in the case of the subprime mortgage sector, there are
times when you ignore the Santa Rally and have to run with the
changing dynamics of the industry.
How do you
get the information you need when an entire industry becomes distressed?
Here again is where it pays to "invest in what you know"
and have faith that you know more than you are giving yourself
credit for. When an industry is distressed the last thing you
should do is to rely upon the corporations' communication to investors.
It's their job to keep you calm while they try to correct the
problem. (For more details on how this works, read my Enron article.)
Savvy investors who cashed out of subprime would have simply checked
to see the trend of foreclosures. Was it increasing? Was it likely
to continue increasing? If so, wouldn't that continue to distress
those companies that were left holding the empty bag on the loans,
regardless of what kind of rah rah speeches the subprime corporations
were giving about being helped out by this or that larger white
I didn't know
much about telecommunications back in 2000, when I began working
for one of the long distance companies, but I did know that long
distance rates had fallen from 25 cents a minute to about six
cents a minute. You can't have that dramatic of a revenue loss
in an entire industry. Global Crossing and Worldcom went bankrupt.
Qwest had a difficult time staying alive.
subprime mortgage lenders were just holding too many worthless
loans to be valuable to a new buyer - regardless of what they
were saying in their press releases. (The telecommunications corporations
were trying to keep investors optimistic when they were going
through their price implosion as well.)
to School Stock Sales: September is historically the
worst performing month each year, and a good time to look for
Back to School Stocks on sale! As Joseph Lisanti, the editor
of The Outlook, Standard and Poor's market newsletter,
noted, "Since 1928, the S&P 500 has declined an average
of 1.3% during September. That's the worst record of any month."
What is bad news for sellers, can be great news for buyers!
in May and Go Away. Almost all Wall Street professionals
take their vacations in August. There is low volume, lower volatility
and less professional attention paid to the markets in August.
July is only slightly more active. I don't like selling in May
- I prefer selling at the market high in January -- but I definitely
like taking a vacation from the markets for two months! Chances
are that if you were denied access to television from July to
December, you wouldn't have one day of heart palpitations over
the stock market. The goal is to know this trend so well in
advance that you calm any misgivings that might occur in your
lizard brain when volatility increases and/or the markets give
up some of the gains that were made in the first two quarters
of the year (and yes, the markets are still up on the year -
even given the recent pullback).
Doldrums. The summer doldrums are reliably boring, even
in spectacular years, like 2003 and 1999! Take a vacation! Everyone
else is! Notice how flat the growth trend becomes in July
and August in the following two charts.
Year Rally. The pre-election years, like 2007, 2003
and 1999 are typically the top-performing year in the four-year
election cycle. Paul Woods, the CEO of Odyssey Advisors, crunched
the data for 164 years and 40 Presidential elections, and the
results were the same: in the pre-election and election years,
the stock markets are more likely to perform double-digit returns,
whereas in the two years after the election, single-digit returns
are the norm. Pre-election years serve up almost double the
gains, on average, as post election years.
Election Cycle - Average Returns
upon total returns 1842 - 2006)
Caps for Performance. As you can see in the asset performance
chart below, companies with market capitalizations of less than
one billion post higher gains than the large, well-known companies.
They are also riskier. Examples of companies like this would
be: Netgear, which posted over 3 times gains by July 2007, since
first being featured in NataliePace.com. AOL in the early days
is another example. AOL had soared over 3000% before the Dot
Com crash, and then spent over six years trading so low that
investor Carl Icahn kept threatening CEO Richard Parsons with
investor revolts! Ted Turner lost billions after the AOL Time
Warner merger in 2000, and then resigned from the AOL Time Warner
board in January of 2003.
As this illustrates,
small caps carry greater volatility, so you have to be on your
mark to take your profits. 12.72% returns every year are almost
double what real estate does historically, but be aware that there
is more risk attached to that return! It isn't really a locked-in
gain until you take your profits by selling!
Caps for Stability. Companies that have been around
for a long time and have a large market capitalization - over
$10 billion - are great stabilizers for your portfolio. Between
2000 and 2002, when the NASDAQ lost over 65% of its value (where
the majority of younger, smaller capitalization companies in
the Internet Technology space are concentrated), the Dow Jones
Industrial Average went down only 22% (where 30 of the large
cap "Blue Chips" are concentrated, like Boeing, Citigroup,
Intel and Coca-Cola). The companies with the biggest value on
Wall Street typically perform at 10.66% returns every year.
Blue Chips are one of the top performing asset classes, but
still under the performance of the small cap companies. On the
other hand, they are a great stabilizing force for your portfolio,
and typically earn dividends while you hold them!
Traded Funds over Mutual Funds. If you've turned on
a television, you've probably heard the pundits espousing ETFs.
ETFs are funds that typically have a much lower cost structure,
pay lower commissions and have lower fees attached to them than
mutual funds. Consequently, they are more popular with investors
than they are with brokers (who make their living on commissions
and fees). If you've had a broker whom you have loved working
with over a long period of time and s/he has performed magnificently,
then it's hard to want to wrestle their bread and butter away
from them (the mutual funds). However, for many people that
is not the case. ETFs have almost all of the benefits of mutual
funds, except that they are not actively managed. Having said
that, some ETFs, like the Wilderhill Clean Energy Portfolio,
do seem to be "smart" ETFs with regard to their holdings.
and Asset Allocation. It is more important to know diversification
and asset allocation than it is to know how to pick stocks.
And it is very important to make sure that you are not trying
to "time the markets" with your financial freedom
plan (your nest egg). Your trading portfolio should be a smaller
portion of your investment portfolio, where you take on higher
risk (in direct proportion to your wisdom, experience and emotions)
for higher gain. Your nest egg is something that you deposit
more money into each month, and let the magic of compounding
work in your favor over time. When the markets return on average
10-12% annually, you don't need to do much other than make sure
that you are invested and not trying to get too fancy.
Disasters. Natural disasters are, in most instances,
buying opportunities, not the Apocalypse. Make sure that you
read the article, "War
and Your Portfolio," for tips on how to protect
your portfolio from disasters, and capitalize upon the buying
opportunities that are created anytime share prices fall. In
the event of a true Apocalypse or Depression, you (and the rest
of the country) will have greater things to worry about than
People Make Better Products Faster
This is my personal economic theory, by which I judge a corporation
and/or a country's ability to perform in the future. In my view,
happiness is directly tied to employee productivity. This article,
from vol. 4, iss. 4, is dense reading, but it is probably the
key to my market edge. (And yes, I'm confident that I will continue
to outperform my peers, even if I hand out a lot of my secrets!
I've still got my rolodex and complex pattern recognition abilities
as well, which I encourage you to develop to improve your performance.)
Remember! My police officer cousin was my "source"
for the information on Taser (before it went on to post up to
9000% gains). You don't have to know the CEO to get some great
scoop on a product or service that is poised to be in style!
The gems of information might be found in what the employees
are telling you! Police officers were relieved in 2002 to have
less lethal force, like Tasers, to secure aggressive criminals!
Economics of Freedom.
This ties into the theory that "happy people make better
products faster, cheaper." Basically, however, whenever
you see that people feel as though they are losing "rights,"
the economic growth is apt to wane or lag. We saw this in some
of the legacy corporations in the U.S. between 2002 and 2007,
when unions were fighting to save employee salaries and health
benefits, even while the corporations were losing money. In
some countries (particularly Western Europe) that were cutting
back on liberal work or social policies in 2005-2006, employees
skipped work to riot in the streets.
are feeling optimistic about their future, they become more
productive, and productivity, according to Dr. Gary Becker (Nobel
Laureate) is one of the leading indicators of economic growth!
Taking this to the extreme, it's pretty hard to make a widget
in the middle of a war, and you have less incentive to steal
from or harm your neighbor when you have more than you need
and love your job! It is legal to apply this idea to publicly
traded companies, and it might give you a clue as to why some
companies can be so forward-thinking and fresh, while others
are a real drag to work for. In the end, it is real people making
these products - for better or worse for the company and the
Markets. When building and construction was booming
in 2004, all of the sudden copper, a basic material in construction,
tripled in price, after having been in a price rut for over
a decade. The share price of major copper mining companies,
like Phelps Dodge, also tripled. Alternative energy was the
top performer in the first half of 2007, after being in the
doldrums for three decades. Emerging markets can be a new market,
like social networking (or Myspace), or simply new blood in
an old market, like corn (when ethanol received so much government
backing in 2007). If it's an older company, you'll need to pay
more attention to debt and the ability to secure more financing
if needed at a reasonable rate. In a younger company, you'll
need to monitor cash on hand, to make sure that the company
has sufficient funding to reach its goals.
Daniels Midland: agricultural commodities and products
of cash on hand and long term debt is much easier than it sounds
and very important! Both line items are listed in the
earnings reports. It's not that difficult to do a search on
the computer using your Find function (Alt F or Apple F). I
routinely "power read" the earnings reports that are
filed with the Securities and Exchange Commission, by doing
a search on the words, overview, debt, cash, income, revenue,
liability, law suit, disclaimer, etc. I find the most interesting
information in the reports are centered around those key words,
and it takes less time than reading one article online!
Performance. Some stocks, like Microsoft, "trade
around the core" of a certain price point for years and
years. Over the first seven years of the new millennium, you
could have bought Microsoft in the low 20s and sold it in the
30s for consistent gains, over and over again, year after year.
Other companies, particularly the younger ones, have a trend
of increasing gains that plateaus at a certain point. Still
others, like mega corporations like Citigroup and Coca Cola,
trade in a steady range, but provide great dividends. You can
review the historical price performance charts EASILY on your
favorite financial news site! It's just one click to create
a one-year chart, five or 10-year chart. Very informative!
P/E. Reread the article "Buy
Low; Sell High" if you still don't understand
price to earnings ratio! On March 31, 2007, the average P/E
of the S&P500 was 17.2, with a forward P/E in 2008 predicted
to be 14.1. According to Standard and Poor's Senior Index Analyst,
Howard Silverblatt, companies still had excess cash reserves
in March, with the industrials having over $600 billion, which
was 5.9% of market value and 39.6% of long-term debt. According
to Mr. Silverblatt, those who were worried about the weak U.S.
dollar weren't considering that many of the publicly traded
companies are now participating in the global marketplace, and
are not over-reliant on the U.S. dollar as the only currency.
Earnings have been outstanding, at double-digit operating growth
for the last 18 consecutive quarters!
sell high is easy to say: hard to do
short, buy low; sell high sounds so easy, but it's counter-intuitive.
It means you're walking in when everybody else is saying, "It's
the Apocalypse," like in October of 2002, and going on a buying
spree. When you are buying low, chances are that everybody is telling
you how stupid and crazy you are. Selling high means that you are
having the vision to see the end of the party. People who sold high,
at the beginning of 2000 or end of 1999, were saying, "We're
going to have a rookie president. We've had eight years of prosperity.
NASDAQ's been running on negative earnings for five years. I think
I'm pulling my profits off the table." I was one of them. Everyone
told me I was an idiot because I didn't understand the New Economy.
Because so many wanted to brag about their gains, many people actually
walked away from me at parties in 1999, like I was some kind of
black cloud! All I was saying was to take their 900% gains out of
AOL! Sell Sun Microsystems at $95!
A few things
to understand. Cash (liquidity) is always king. You can't have too
many years of negative earnings in most companies. (There are some,
like airlines, that the government bails out.) Be wary if the average
P/E gets too high. Be attentive and investigate the investment opportunity,
if the revenue at any corporation is doubling. As a rule, look for
Back to School Stock Sales in September (historically the lowest
performing month) and selling opportunities in January (historically
the highest performing month). And NEVER PAY RETAIL!
Now, that Santa
Rally trend didn't work for many subprime mortgage investors in
2007, and that is an important consideration to consider: is there
a time when you should sell during the summer doldrums lows? The
subprime lenders took a big hit in April of 2007, and the amount
of foreclosures in this market began increasing at a devastating
rate. By May of 2007, many of the stocks in the subprime mortgage
industry had lost most of their value, but it was still a good idea
to cut losses by selling as quickly as possible, rather than hope
that the Santa Rally would inflate new optimism and investors in
the sector. New Century Financial bit the dust in 2007. Novastar
Financial did a reverse stock split in July 2007. Every four shares
of Novastar common stock were changed into one share of common stock.
(Reverse splits are typically a sign that the company is in great
distress and trying to avoid a delisting of the stock. The New York
Stock Exchange and NASDAQ have share price requirements to remain
listed, amount other qualifying events.) So, as in the case of the
subprime mortgage sector, there are times when you ignore the Santa
Rally and have to run with the changing dynamics of the industry.
The writing and opinions of Steven Selengut are his, and do not
necessarily represent the opinions of NataliePace.com, staff, management
or writing team.
Boycott the If I Did
special message from Denise Brown.
a link to support the Nicole Brown Foundation in their efforts to
eradicate domestic violence.
sister of Nicole Brown Simpson, is shocked and horrified by Goldman
family decision to publish OJ Simpson's "If I Did It"
book. "Even though I saw it going in this direction I still
can't believe the Goldman family would go through with this. I just
received news that the Goldman family has finalized a deal with
a publisher in New York that was revealed by Michael Wright, a spokesman
for Los Angeles-based literary agent Sharlene Martin of Martin Literary
Management representing the Goldman family.
I am asking
everyone in our country and the world that was instrumental in keeping
this "Manual on Murder" from being published the first
time to step forward and speak loud and clear once again.
Let's hold Fred
Goldman to his own words, "Make certain that this material
never sees the light of day".
that someone is willing to publish this garbage that Fox is willing
to put it on air is just morally despicable to me." said Fred
Now Fred justifies
publishing the book because he feels it's a confession by the killer,
OJ Simpson but previously in an interview, Goldman says "I
don't imagine for one second that he (OJ Simpson) considers this
once again, "I would hope that no one would buy the book. I
would hope that the message from people in this country is sent
to his publisher, is sent to Fox that this is disgusting and despicable,
that we as a nation won't put up with it."
buy the book. It's morally reprehensible." said Goldman.
I'm all for
the Goldman family taking OJ Simpson for every penny he's worth
but not in this atrocious way.
I plead with
the public to help protect the two innocent victims in all of this.
I can't bear that Sydney and Justin; Nicole's children will have
to be subjected to this step-by-step manual on how their mother
and her friend Ron were murdered. Please help us stop Fred Goldman,
the publisher and any one involved with this horrendous business
us hold Fred Goldman to his own words.
interviews of Fred and Kim Goldman please go to www.denisebrown.com
and click on Current Events. If you wish to sign the petition against
this book and make your voice heard, you can do that at www.denisebrown.com
Instead of buying the book on how Nicole Brown was murdered, why
not choose, instead, to support an agency local to you that is working
to eliminate domestic violence.
The Truth Will Set You Free—But First,
It Will Scare You Silly.
Campbell, author of Zero to Zillionaire.
Campbell, author of Zero to Zillionaire.
In the beginning
of teaching my workshops, I focused on just the good things I knew
and could exemplify. I stayed away from the sticky wickets—the fact
that I had been in abusive relationships, the fact that I had filed
bankruptcy and lost a home to foreclosure, the fact that I had abused
alcohol to the point I had to get myself to Alcoholics Anonymous
to get sober.
But a funny
thing happened when I started to share these things. A couple in
my class was struggling with their debts and considering bankruptcy.
I was trying to help them determine what to do, when the young man
looked at me petulantly and said, "Well, easy for you to say,
but you've never been in these circumstances, have you?"
It was the
first time I had been directly confronted with the issue in class,
and suddenly I knew I couldn't hide it any more. I said, "Yes,
I have, and I filed bankruptcy."
I looked around
at a group of shocked faces, and then poured out my story. I had
always told the beginning of the story: How my biggest client in
my business management firm had left with only two weeks notice
and how I scrambled to save my business and started teaching financial
What I hadn't
shared was how I borrowed $50,000 on credit cards to save the company,
how I had tried to pay it back over the next five years, and how
the 19.8% interest ate me alive. I hadn't told them I lived on Low
Budget for years and when my budget failed, or a client didn't pay
me, I borrowed even more on the credit cards, because by then it
was a habit to borrow. I hadn't told how I drank to cope, and drank
more to sleep. Or how humiliated I felt to be the president of a
leading women's organization, owner of a bookkeeping service, and
teaching Financial Stress Reduction® Workshops—and I was the
most financially stressed person in the room. Or how filing bankruptcy
and going to Alcoholics Anonymous got me sober in money and sober
in drink, and got me started on the road to financial, physical
and mental recovery.
But this day
I told it all. I told them how I faced my own demons and recognized
that every principle I was teaching in my workshops was something
I wasn't doing in my own life. My students had all been improving—they
were making more money, having more fun, and doing more good. But
I wasn't. What was the difference between them and me? They were
following the instructions and doing what I told them to do. They
were doing affirmations every day—I wasn't even doing that. I saw
as I talked to them what had to change: I had to change.
That day, I
humbly enrolled myself in my own course. I took every class with
them. I listened to every instruction I gave—and then followed it.
And my life improved dramatically. My income doubled in six months.
I was happier, richer, more fulfilled and more at peace with myself.
But the biggest
change was in my students. They heard my story and knew I had suffered
just like them. That I had made mistakes just like theirs; that
I wasn't perfect, that I wasn't born with a silver tongue or a silver
spoon in my mouth. I was just like them. And if I could use these
tools to turn my life around, then they could, too. It gave them
more hope, and it gave them more faith. From hope and faith, action
is born. And when you have faith and take action, you can produce
miracles. Or you just put yourself in the way of miracles. It seemed
to me that everyone who took my class after I began telling the
truth had bigger successes. I certainly did.
I'm not saying
you should wash all your dirty linen on your resume or dry it in
the boardroom. I am a teacher and the best illustration I know is
how the principles I teach worked for me first, and then how they
worked for others. When you see that, you see how they can work
for you. Look within your own life and see where honesty and vulnerability
might reach Your People in ways that being high on a pedestal won't.
Tell of the things you know and how you know it. Admit the things
you don't know and ask others if they do.
We are all
drowning sometimes. But our lifesavers are all around us. Reach
out for them. Sharing the truth with others strengthens you both
in ways seen and unseen. Lifting each other up, we survive another
day. Until one day we reach the shore.
Campbell is the author of Zero to Zillionaire and The
Wealthy Spirit. 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.
If you are stuck
in a rut in your business or life and/or having too much "month
at the end of your money," Chellie's workshop might be just what
you need to get things on the right track. You can sign up for Chellie's
Ezine and workshop at www.chellie.com.
How to Find a Financial
Spiegelman, vice president, financial planning, Schwab
Center for Financial Research.
your financial picture is complex, it can be a daunting task to
manage your portfolio and navigate the ins and outs of retirement
planning, estate planning, insurance, investments and taxes. That's
where financial advisors come in.
A financial advisor is an experienced professional who can provide
a wide range of financial expertise, including managing your money
for you so you don't have to handle all the details yourself.
Generally speaking, financial advisors are best suited for people
with at least $250,000 in liquid assets who are willing to give
up day-to-day control of their portfolios (though different advisors
have different minimums).This is important.
It makes little sense to hire a financial advisor only to call him
or her every day to learn how your financial plan is going. After
all, the idea is to develop a game plan to achieve your financial
goals and objectives, and then let the advisor manage the plan so
that you have more time for family, career, hobbies and so on.
A Long-Term Relationship
Selecting a financial advisor is the first step in a long-term relationship.
Your financial advisor will act as a sounding board for your ideas
and help you formulate a plan for what you want to accomplish financially.
For these reasons, it's essential that you and your financial advisor
share a certain chemistry and be on the same wavelength. You've
got to feel comfortable asking questions. And your advisor must
be able to explain the potential benefits and consequences of every
aspect of your financial roadmap in a way you can understand.
How do you find a financial advisor you feel comfortable with, who
will do right by you and your money? Here are some steps that can
*Get referrals and make appointments
*Prepare for the initial consultation
*Learn how the advisor gets paid
*Verify the advisor's history, credentials
Get Referrals and Make Appointments
Start by asking friends, relatives and business colleagues if they
have a financial advisor they trust and with whom they're comfortable.
Ask other financial professionals you deal with, as well.
After all, financial professionals rarely work in isolation; they're
part of informal networks of accountants, lawyers, insurance agents
and brokers. Having a trusted CPA or broker recommend a financial
advisor, for example, not only makes sense, but it can also build
on a relationship you've already established.
Another way to find a financial advisor is to go through a recognized
public trade group, such as the Financial Planning Association or
the American Institute of Certified Public Accountants.
Prepare for the Initial Consultation
Spend time the week before the consultation speaking with your family
and outlining your goals. And remember to set aside a comfortable
amount of time during the day of the meeting — you don't want to
feel rushed or pressured.
Your first meeting with an advisor should be free, so use it well.
Bring a list of written questions so that you can stay focused,
and take notes so you can compare answers from different advisors.
Here are some examples of good questions to ask:
- What's your
- How long
have you been in business as a professional?
- What size
is your firm and how many clients do you have?
- What types
of services do you offer?
- What's your
management style and philosophy?
- Do you prefer
specific types of investments?
- What has
your past performance been for clients with investment needs and
risk tolerances similar to mine?
- How much
money do you manage?
- How are you
- Will I maintain
control of my assets and where will they be held?
- With whom
will I be working?
Maintain a professional
tone and make sure you get answers to your questions. True experts
can explain even complex topics — hold a financial advisor to the
same standard. And don't be afraid to ask any question, no matter
how silly you think it might be.
Learn How the Advisor Gets Paid
It's perfectly reasonable to go into the details of how the advisor
is compensated, along with the services and attention you would
receive in return.
Some advisors receive a flat fee for their services, while others
take a fee based on assets under management. For example, if you
have $250,000 you'd like the advisor to manage, a typical fee would
be 1 percent, or $2,500 per year (as assets under management go
up, the 1 percent fee typically goes down; fee "breakpoints"
vary). You also want to know whether the financial advisor receives
any commission, reimbursement or incentive for selling specific
types of investments.
Lastly, remember to ask how much a follow-up meeting would cost.
You don't want to receive an unexpected bill for a second consultation.
Verify the Advisor's History, Credentials
The Securities and Exchange Commission requires advisors who charge
a fee to manage your money to register what's known as form ADV
either with the state (those who manage less than $25 million) or
with the SEC (those who manage $25 million or more).
The ADV provides pertinent information about the financial advisor,
advisors are also licensed securities brokers. Those who are should
have a Central Registration Depository file, which provides information
similar to the form ADV (which is just for financial advisors). CRD
files are available through your state securities agency or the FINRA
Regulation Public Disclosure Program.
- How the advisor
- Any disciplinary
actions or complaints
Along with an advisor's history, take a look at the acronyms that
appear after his or her name. Such professional credentials denote
a level of education and experience in the financial service business.
Here are a few of the qualifications you may encounter:
— Certified Financial Planner
— Chartered Financial Consultant
- CPA — Certified
- CFA — Chartered
for a list of clients who could serve as references. Be sure to
call them and ask about the quality of service and the fee arrangements.
You want to make sure all the information you receive is consistent.
Don't be discouraged if you haven't found an advisor you feel comfortable
with after your first few interviews. Stick with it. With a little
effort, and these guidelines in hand, you'll be well on your way
to finding a financial advisor who's right for you.
Number One After 25 Years.
Wright, the managing editor of Investment Quality Trends, reports
on his Select Blue Chips, which are still earning the top risk-adjusted
returns over the past 25 years.
Wright, Managing Editor, Investment Quality Trends stock newsletter.
the Feds Lower Rates in September?
can all rest easier as Dr. Bernanke informed the markets on August
31, 2007 that the Fed was on the job and would remain vigilant.
Whew; isn't that a relief. Signs
that an election year is on the horizon are apparent with soothing
about help for the mortgage market coming from Washington D.C. I
know what Washington thinks it can do for folks that took down mortgages
they can't afford, short of bailing them out, but never underestimate
the creativity of elected officials in search of votes. The
initial panic phase in the markets seems to have subsided for the
but corrections can be messy affairs. The consensus is that the
ride to the rescue by lowering the Fed Funds rate in September,
December, but I wouldn't count on anything until we see it happen.
like to have things buttoned up nicely and in that vein I still
will see a test of the August 24 lows just to make sure that we
established a bottom.
A market correction
is a process that takes time and this time won't be any different.
The bounce at Dow 12,600 was predictable because the 1,400 point
decline from Dow 14,000 presented a textbook 10% correction. At
some point, the market will want to establish whether Dow 12,600
was the bottom. My thought is that we will know soon.
in both my writing and when I speak publicly, I make reference to
the three primary asset classes; stocks, bonds and cash. The context
for the reference is that the purpose of investing is to consistently
increase the amount of money one has to invest so as to consistently
increase the amount of income one can spend on current and future
cash needs. Of the three primary asset classes, in my opinion, the
most appropriate for the purpose stated above is stocks, more specifically
Select Blue Chip stocks.
Often, I am
asked whether I am being too simplistic in limiting my discussion
to just these three asset classes considering the myriad investment
options available in the modern financial marketplace. With recent
events in the credit markets fresh in most investors' memories,
I am presented with a convenient opportunity to answer the query.
Cash is a primary
asset class because, well, it is money. We need money to pay for
the things we use and need (as a quick aside, I chuckle when neighbor
Richard Russell of Dow Theory Letters tells of trying to pay for
something with a one ounce gold coin and the clerk told him they
only accept cash or credit cards!).
Bonds are a
primary asset class because they represent a fixed income stream
for a specific period of time, contain a promise to return the principal
on a date certain and if need be the highest grade issues such as
Treasuries and Government Agencies are also liquid (can be turned
they are high quality and offer good value (read Select Blue chips),
are generally liquid. The real value of a stock, however, is in
its underlying dividend, which once again is real money.
which consist of collateralized debt obligations (CDO's), credit
default swaps and other exotic mechanisms, well, they just aren't
money. Sub-prime mortgages and certain other types of asset-backed
debt are not money. A lot of things that the markets have treated
as a store of value or a medium of exchange are simply not money.
it really is about the money. Cash, it appears, is still king.
MARKET FUNDS: ARE THEY SAFE?
majority of money market funds are safe. Occasionally, however,
a money fund manager will extend the funds' duration and invest
in credits and maturities more suitable for a long-term bond fund.
Such was the case with Sentinel Management Group, Inc., and the
fund had to be closed when they couldn't sell assets sufficient
to meet redemptions. While this was a rare case, I am a big advocate
of U.S. Treasury money market funds. A few basis points in yield
are well worth the safety and security. It is difficult to put a
price tag on peace of mind.
issues' Timely Ten is a good representation of the points made in
the Mail Call response found at the bottom of this article. Colgate
(CL), Johnson & Johnson (JNJ), PepsiCo (PEP), and McDonald's
(MCD) are just classic companies and an excellent foundation for
any portfolio. Automatic Data Processing (ADP) has struggled, but
its fundamentals and track record are exemplary. Bank of America
(BAC) is our second largest holding after Altria Group (MO), and
in our view, the best run bank in the U.S. Cardinal Health (CAH)
has been admonished for its sins of commission, but will prosper
over the long-term. TJX Companies (TJX) is a great 3rd
and 4th quarter company that offers excellent value.
American International Group (AIG) has been on the road back from
myriad concerns, some warranted and some not, and offers excellent
historic value. Jack Henry (JKHY) declined briefly in sympathy with
the financial stocks that it is tied to but has rebounded nicely;
an excellent company. We still like Sysco Corp. (SYY) from the previous
Timely Ten and would give it a solid 11.
in the Undervalued and Rising Trend categories of the Investment
Quality Trends stocks newsletter is considered part of our model
portfolio for performance tracking purposes. To mirror that performance
would require holding one hundred six stocks as of the Mid-August
issue; clearly too many positions to be practical.
are looking to build a portfolio from scratch, are partially invested
and looking to add new positions, or fully invested and in need
of some affirmation and hand holding, the Timely Ten presents our
top ten recommendations as of each issue. Short of utilizing the
personal investment management services of our sister company, this
is as close to real time as you can get.
The timely Ten
consists of Undervalued stocks that generally have a S&P Dividend
and Earnings Quality rating of A-or better, a G designation for
exemplary long-term dividend growth, a P/E ratio of 15 or less,
a payout ratio of 50% or less (75% for Utilities), debt of 50% or
less (75% for Utilities), and technical characteristics on the daily
and weekly charts that suggests the potential for imminent capital
appreciation. This issue's selections are:
in mind that as an investment newsletter, we are legally bound to
only answer questions of a general nature and are unable to provide
specific buy/sell recommendations or specific advice on an individual
basis. For those interested in obtaining more information on individual
management services in accordance with our approach, we have a sister
company named I.Q. Trends Private Client Asset Management, which
is a Registered Investment Adviser. Among the offerings provided
by I.Q. Trends Private Client are individual portfolio consultations
and active account management. For more information, please call
Mr. Michael Minney at 858.427.1071.
Day to all.
with Kelley Wright ONLINE at NataliePace.com on September 12, 2007
at 8:45 a.m. PT!
Kelley is the
No. 1 Blue Chip Stock Picker on Wall Street for the past 25 years
in risk-adjusted returns, according to Hulbert's Financial Digest
(an independent newsletter that ranks stock pundits). Their focus
is dividend-paying Blue Chips. Chat with the Managing Editor, Kelley
Wright, and learn what companies are hot for 2007, and how you can
mirror his returns for the price of a stock newsletter!
Access the Online Chat Room:
Go to NataliePace.com
Click on Chat Room
Click on Already a Member
ENTER IN YOUR PASSWORDS AND PRESS ENTER (or RETURN)
Type a Nickname for yourself in the text box (beneath the color
Click on LOG IN
Type your question into the text box and click on return (or enter)
It is a good
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you from participating.
USER ID: Blue
is currently outperforming all of his peers, by bringing in the
top risk-adjusted returns on Wall Street for the past 20 years,
with his stock newsletter, IQTrends.com,
at 12.8% annualized gains, according to Hulbertˇs Financial Digest.
To subscribe, go to IQTrends.com.
The Markets Are Up
On the Year. So Why All the Doomsday Headlines?
Pace. Includes my Hot News on Cool Stocks list.
of the companies featured in my stock newsletter between 2002 and
2005 -- 25 out of 52 companies -- DOUBLED from the time we listed
them in our feature article to the time when I took the company
off of the Hot News on Cool Stocks list. (See the chart in the article,
of our Companies
Have Doubled," from volume 4, issue 4, the April 2007 ezine,
for a listing of companies.)
the market performance of the companies that are featured in my
Hot News on Cool Stocks list are still keeping me at the top of
over 830 A-list pundits on TipsTraders.com in annualized
gains! According to the Tipstraders tracking data, all of the companies
featured in the NataliePace.com Hot News list are pulling down 28%
gains on average every year, and TipsTraders has me listed as one
of the top 10 stock pickers in terms of all-time performance. 28%
annualized (every year) is a whopping 140% return over just five
years (which is much higher than the red hot real estate market!).
The Hot News lists below feature 38 companies earning great gains,
versus just seven (even after the recent market pullback) that are
headed in the opposite direction.
August 14, 2007 headline on the front page of the NY Times read:
"Small Investors Feel Less Pain as Stocks Slide: Professionals
are hit hardest by turmoil." The writer went on to compare
July 2007 to the technology crash of 2000, writing, "The wild
swings in the stock market over the last few weeks have reawakened
memories of the technology crash of 2000 in which many small investors
lost their savings." Wow. The comparison couldn't be farther
from the truth, but I suppose the hyperbole serves to sell papers.
The technology crash of 2000 wiped out over 60% of a person's technology
holdings -- and NASDAQ is down over 45% from its March 2000 high.
(See the black NASDAQ trend line in the chart below.) Whereas, all
of the major indices in 2007 are still up on the year, even with
This is why
I'm headline-phobic! This is why I say to turn off the television,
stop reading news and come to my Living
the Rich Life Retreat to learn how to invest, using
my easy-to-use, easy-to-understand Cooking Up Profits recipe. (The
next retreat is in January 2008. Get details on the home page at
NataliePace.com.) You don't stay one step ahead of trends by trading
late on headlines. Makes sense, right? You make gains by understanding
what will become tomorrow's headline, and this is much easier
than you think.
have had a pretty good year, despite the histrionic headlines of
newspapers trying to sell copies, and we still have the seasonally
strong Santa Rally waiting in the wings. See below for the returns
of the stock market this year and last, which are performing well
above real estate and bonds over the same period! I'm also listing
some of our great hits because, once again (and every year since
the inception of our ezine), the NataliePace.com stock newsletter
is having a banner year.
Stock Market Performance
& 71/2 months
+24% & +8%
+17% & +9%
+17% & +5%
Pace.com Company of the Year Stocks (4 out of 5 are huge winners)
2003 - Taser
(the stock split
3 times after our feature)
(Closed out on February 2005, before earnings of 2.8.05.)
2004 - Opsware
2004 feature. 692% since first feature on December
2005 - OSI
This stock is
down from our feature, but investors who have watched it on
our How News list have made money.
2006 - MySpace.com
Acquired by News
between April and November 2005 (when it was acquired by News
2007 - Suntech
the blue-highlighted words to link to the feature article. (Please
note that the ezines from 2002 and the first half of 2003 are no
longer featured online.)
As you can see
directly below, in the Hot News list, the performance of the companies
featured over the last two years is on track to be as impressive
as the companies that were featured between 2002 and 2005, even
with the recent market pullback. We've still got 38 companies earning
gains, versus only eight that are headed in the wrong direction
(and might be in buying range). The majority of the companies featured
in this ongoing article are performing well above the performance
of the marketplace.
Back to School
is historically the worst performing month each year, and a good
time to look for Back to School Stocks on sale! As Joseph Lisanti,
the editor of The Outlook, Standard and Poor's market newsletter,
noted in 2005, "Since 1928, the S&P 500 has declined an
average of 1.3% during September. That's the worst record of any
month." What is bad news for sellers, can be great news for buyers!
Have your shopping list (or your Hot News on Cool Stocks article)
handy to see what might be in buying range at the end of September.
Don't be in a rush to purchase during the summer doldrums, when
the markets tend to be more volatile.
2007, in the article, "Buy
High; Sell Higher?
Why 2007 is Poised to be a Banner Year," we began reporting
that the pre-election year rally trend was supported by high cash
levels in corporations (particularly in the technology, new media
and metals sectors), interest rate trends and earnings. Additionally,
with real estate softening, investors that had been enamored with
that market turned back to Wall Street for performance. We continue
to expect that 2007 will finish strong, with momentum gaining through
the Santa Rally and into January 2008 (even given the concern over
sub prime and the most recent pullback). The important thing
now is not to buy HIGH, however. Stay calm and rational.
In August of
2007, the average price to earnings ratio in the S&P500 was
lower than it had been in twelve years! In June 2007, the average
P/E of the S&P500 was 15.9, with a forward P/E in 2008 predicted
to be 14.1. (In the quarter ending June 30, 1995, the average P/E
was 15.82.) Last month, according to Standard and Poor's Senior
Index Analyst, Howard Silverblatt, companies still had excess cash
reserves, with the industrials having over $600 billion, which was
5.9% of market value and 39.6% of long-term debt. Those investors
who were worried about the weak U.S. dollar weren't considering
that many of the publicly-traded companies are now participating
in the global marketplace, and are not over-reliant on the U.S.
dollar as the only currency. Earnings have been outstanding, at
double-digit operating growth for the last 18 consecutive quarters!
As a result, in this month's MarketAttributes Snapshot, Mr.
Silverblatt wrote, "The numbers continue to show Q3 as the
bottom…Q4 could return to double digits with the help of lower gasoline
prices and less competitive sales during the holiday season."
Keep cool this
summer, even as our Hot News list keeps your portfolio red hot!
And yes, even though I typically take off during August, I did crawl
out of the ocean to do this update because with all of this volatility
and these explosive headlines, I thought you might need it!
Peace and Prosperity,
OPPORTUNITES AND INFORMATION:
surprisingly, the Feds decided to keep rates at 5 Ň percent during
their August meeting. It is not uncommon for a rate cut to be issued
in the final quarter of the pre-election year, and, though curtailing
inflation remains a concern for the Feds, with the real estate situation,
there is pressure now to consider a rate cut before the holiday
season. Almost 50% of analysts surveyed by CNBC in August believed
a rate cut would occur at the September meeting, and that was before
Chairman Bernanke began issuing statements that he was on the job
about subprime concerns. Based upon the current data and a general
read of Chairman Bernanke's stewardship, I'd say October is a better
bet. This Chairman likes to give the market an opportunity to absorb
shocks without regulatory intervention, when possible. As things
change, we'll keep you posted on the news.
Rates: In a Pause Pattern. The Federal Open Market Committee
has paused nine times in a row now (in August, June, May, March
and January 2007, and December, October, September and August
2006), after raising interest rates 17 consecutive times prior.
The federal funds rate remains at 5-Ň%.
in reading the minutes
of the August FOMC meeting for yourself? You can. It
is available online. Click on FOMC,
or go to FederalReserve.gov, to read!
tentative FOMC meeting schedule for the 2007 calendar is: September
18 (Tuesday), October 30-31 (Tuesday-Wednesday), December 11
(Tuesday), January 29-30, 2008 (Tuesday-Wednesday). The fact
that the Federal Open Market Committee has decided to increase
the number of 2-day sessions from two to four is an indicator
that there is double the concern over managing the economy in
the coming months.
Section: Conferences, Online Chats and more: Check
out the Calendar section of NataliePace.com regularly. There
are many wonderful opportunities to chat one-on-one with millionaire
money managers, economists, respected money gurus, real estate
veterans and CEOs! Be sure to join me in my September teleconference
and in the September 12th chat with Blue Chip stock
picker Kelley Wright! Details are at the calendar section. Phone
information will be provided to all active subscribers by email.
Be sure that you have added NataliePace.com to your mailing
list and are receiving our email!
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. Your investments and portfolio
should take into account your age, your retirement goals, 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.
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.
Hot News On Cool Stocks List
I have listed the companies that I currently own under the column
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. This 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 (if you have already purchased them). 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. See below for the "Wait" list and the "Cooling
Companies (Hot List):
& Johnson (JNJ)
& Nephew (SNN)
The two companies
listed below are not highlighted on the Hot News list because they
are not considered to be in buying range.
(Deletion, profit-taking range). Read more on this company beneath
the Hot News List and in the September 2007 REITs article.
Health Investors (Addition, near profit-taking range). Read more
on this company in the Hot News List below and in the September
2007 REITs article.
since original feature
the Article, "Golf Carts and Sports Cars," in vol.
4, iss. 6.
ezine Vol. 4, issue 2, for the feature article, "Apple
Chips." Google CEO Dr.
Eric Schmidt joined the Apple board of directors in Oct. 2006.
Somehow Jobs skated through the options backdating scandal,
though former CFO Anderson and General Counsel Nancy Heinen
were nailed by the SEC. The craze over the iPhone, iPod and
all things Apple, and the clout that Jobs is gaining with
his alliances with Disney and Google should keep Apple at
the top of the technology performers over the next few years
at minimum. At 43.60, the P/E is no bargain, however, last
quarter, the growth was 88%, and that was before the launch
of the iPhone. Apple is a company you're going to want to
own - and everyone wishes they'd had the prescience to buy
in at a better price. On 7.25.07, Apple(R) announced 3Q
earnings of: revenue of $5.41 billion and net quarterly
profit of $818 million, or $.92 per diluted share. These results
compare to revenue of $4.37 billion and net quarterly profit
of $472 million, or $.54 per diluted share, in the year-ago
quarter. Gross margin was 36.9 percent, up from 30.3 percent
in the year-ago quarter. International sales accounted for
40 percent of the quarter's revenue.
shipped 1,764,000 Macintosh(R) computers, representing 33
percent growth over the year-ago quarter and exceeding the
previous company record for quarterly Mac(R) shipments by
over 150,000. The Company also sold 9,815,000 iPods during
the quarter, representing 21 percent growth over the year-ago
to Steve Jobs, Apple's CEO, "iPhone is off to a great start
-- we hope to sell our one- millionth iPhone by the end of
its first full quarter of sales -- and our new product pipeline
is very strong."
earnings on 7.20.07. Refer to the M&A
in volume 3, issue 6 for details on Citigroup's appeal. Citigroup
announced on May 10, 2007, that Citigroup China would roll-out
two new investment products -- Structured Investment Accounts
-- for the Chinese consumer that would allow him/her to invest
in equities or currencies, with a principal protection feature.
Just a few years ago, all banks in China were state-owned
enterprises. Citigroup was first mover in the Chinese consumer
equity marketplace. Purchased AkBank on 1.09.07. Akbank currently
has 675 branches and 1,617 ATMs and is a premier, full-service
retail, commercial, corporate and private bank in Turkey,
with assets of $39.6 billion, loans of $19.6 billion and a
deposit base of $25.0 billion. It is the third largest bank
by assets and the most profitable private banking institution
in the country. Hired new CFO, Gary Crittenden, on 2.25.07,
to be effective 3.15.07. (Sallie Krawcheck will return to
her old job as Chairman and CEO of Citi's Global Wealth Management.)
Sandy Weill spoke on CNBC on 2.26.07 on having such a big
company with an umbrella over many divisions. He says, "I'd
rather be with a company that has a strong capital base, diversified
by companies and regions, in the event of a downturn."
Citigroup acquired servicing rights for $45 billion worth
of loans formerly held in ACC's Ameriquest company. Terms
of the deal, expected to close Sept. 1, were not disclosed.
is the nation's largest financial institution.
of 8.1.07: $9 billion in revenue, over $8.5 a year ago. Net
income was $1.178 billion over $1,125 a year ago. Disney/Pixar/ABC,
distributed by Apple iTunes. Hmmm… The most successful animation
film company meets the most successful family media company
meets the most successful new media device, the iPod. Sounds
like the happiest place on Earth to us. The largest individual
stockholder is Steve Jobs. During the first six months of
fiscal 2007, the Company repurchased 96 million shares for
approximately $3.3 billion, of which 67 million shares for
$2.3 billion were purchased in the second quarter. On May
1, 2007, the Board of Directors of the Company increased the
share repurchase authorization to a total of 400 million shares.
Pirates of the Caribbean blockbusters equal film
profits, DVD profits and renewed interest in the theme parks!
According to the annual report, CEO Bob Iger received $22
million in compensation last year (not including stock options).
His pay included $2 million salary and a $15 million cash
bonus. CEO Bob Iger was one of our Executives
of the Year in 2007. Read
the article in vol. 4, iss. 1. We'll be reporting on the
possibility of strikes by the Screen Actor's Guild, Director's
Guild and Writer's Guild in the October ezine. The WGA contract
is up on October 31, while the SAG and DGA contracts expire
in June 2008, according to Variety. Although the studios
have all ramped up production to stave off the effects of
a strike by the unions, a strike could certainly parch the
investor appetite in film companies, even if it doesn't cripple
Outpaces News Corp's MySpace,"
in volume 3, issue 9, "Executives
of the Year" in January
2007, which featured CEO Meg Whitman (vol. 4, iss. 1). Skype's
new products (Wi-Fi VOIP phones in particular and associated
hardware) will likely start adding a significant chunk to
the eBay bottom in 2007, since Skype is growing faster than
MySpace in terms of registered users. eBay bought StubHub
Inc. for $310 million on 1.12.07. 3Q 2007 earnings were announced
on 7.18.07: record consolidated Q2-07 net revenues of $1.83
billion, representing a growth rate of 30% year over year.
GAAP net income in Q2-07 increased 50% year over year to $376
million, or $0.27 earnings per diluted share.
the article, "Green San Jose Company," in vol. 4,
Europe -- U.S. Global Investors
seems to be in the right countries, and within those countries,
in the right growing sectors. See vol.
2, issue 8. Great way to diversify,
as well as to add growth. Eastern EU economy rocks. Western
EU economy stalls. Your international fund should reflect
from vol. 3, iss. 12. Sales are still weak, but the company
is beating analyst expectations and the founder is back in
the interim CEO, as GAP continues to search for the perfect
design and management team. "We are actively working to fix
our core business, retain and recruit talent, and streamline
operations so that our organization can be more nimble and
efficient," said Bob Fisher, interim president and chief executive
officer at Gap Inc. "We took important steps in the first
quarter by strengthening leadership teams and refining strategies
at Gap and Old Navy. While we are making progress, there is
more work to be done." In the "show me your friends and
I'll tell you who you are" category, the friends surrounding
Gap these days are mighty, powerful and successful. You've
got Goldman Sachs advising them on the turnaround strategy.
GAP is one of an elite group of companies that are attached
to PRODUCT (RED), the pet project of Bono and Bobby Shriver,
alongside Apple, American Express, Motorola, Emporio Armani
and more. The fast, definitive action, the ongoing commitment
to Bono and Bobby Shriver's PRODUCT (RED) and having Goldman
Sachs in their corner really sets the stage for some promising
surprises for this legacy clothing retailer. Especially if
the team comes up with a winning designer. Things could hardly
be worse for the Gap, but, with the talent assembled for this
turnaround, we're optimistic that it is always darkest before
the dawn. Upgraded from Neutral to Positive by Susquehanna
Financial on 8.28.07. Beat analyst earnings estimates on 8.24.07.
its 2007 second quarter earnings on Wednesday, July 11, 2007,
of U.S. product sales of $2.149 billion, a 25 percent increase
over U.S. product sales of $1.716 billion in the second quarter
of 2006. Genentech has initiated eight Phase III clinical
trials, and plans to resubmit the sBLA for Avastin with chemo
treating breast cancer to the FDA in August. Major growth
for a big cap, and trading at prices not seen in over two
years! Purchased Tanox on 1.16.07. Received 8 FDA approvals
in 2006. DNA is a Great Blue Chip Hold for your long-term
portfolio. Genentech specializes in DNA-based cancer treatments
that might ultimately eliminate the need for chemotherapy!
(Avastin chokes off the blood supply to the tumor.) Biotechnology
is a volatile sector, but this popular #2 biotechnology company
has a big pipeline of drugs. Cancer drugs are a $20+ billion
annual market, and DNA has appx. $8-9 billion of the market
cornered. Avastin alone is expected to bring in $2 billion
in annual sales in 2007. Tarceva is rocketing up the sales
charts, with sales of $402 million in 2006, and $204 million
in the first two quarters of 2007. DNA's P/E ratio is well
below other biotechnology growth companies.
January 2007, there have been over 650 "Statements of
Beneficial Changes in Ownership" filed with the SEC.
eBay just pulled a large block of ads that were on Google,
and placed those ads on other search engines, like Yahoo,
MSN and AOL. The loss of revenue should be under 2%, according
to analysts. Google joined the S&P 500 on 3.31.06. Great
Blue Chip Hold for your long-term portfolio. Owns YouTube.com,
one of the most popular sites on the web, which got hit with
a billion dollar lawsuit from Viacom on 3.13.07. Dr. Eric
Schmidt was one of our Executives
of the Year
in 2007. Read the article in vol.
4, iss. 1. The growth continues to be amazing, and the share
price continues to be amazingly volatile! The savvy day-trader
would buy on disappointment and sell on hot headlines. The
long-term investor would buy at the 52-week low and hold to
will to the kids. (Notice that Google is NOT highlighted and
is not considered to be a good buy right now.)
Chips," article in vol. 4, iss
2. Intel is beating Advanced Micro Devices in products and
price. AMD is fighting back in court and by slashing costs.
The price war is tough on both, but easier for Goliath to
win. Intel's sales were down (largely due to AMD competition)
from $38.8B in 2005 to $35.38B in 2006. A Good Blue
Chip long term hold for your portfolio, with dividends.
you invest in JetBlue, bear in mind that a spike in gas or
oil prices would severely ping profitability at the airline.
Fuel is one of the biggest expenses of any carrier, and operating
margins are sliver thin. George Soros and David Neeleman (CEO)
both sold millions at the end of May, at $10/share. Both still
have millions of shares remaining as well. Because of the
proportions of this selling (and the amount of shares both
have remaining), the proximity of the sales and the relatively
low price of the stock, it almost smells of a operations-type
funding deal, rather than lining one's own pockets. Any way,
with higher rates and seasonally strong travel, the quarterly
earnings should improve for the next two quarters, providing
oil doesn't spike.
the article, "Bionic Baby Boomers," in vol. 4, iss.
7. Johnson & Johnson is a mega-cap corporation with many
products, and a small presence in the hip resurfacing arena.
Growth is 16% annually, with a 17.40 P/E. Stable, dividend-paying
Blue Chip that is undervalued currently.
you visited the Coffee Bean and Tea Leaf shops lately? Seen
Krispy Kreme doughnuts in the pastry case? KKD is expanding
into Asia - namely Macao, the Phillipines, Hong Kong, Indonesia
and Japan. There are currently approximately 296 Krispy Kreme
stores and 99 satellites operating system-wide in 41 U.S.
states, Australia, Canada, Hong Kong, Indonesia, Japan, Kuwait,
Mexico, the Philippines, the Republic of South Korea, United
Arab Emirates and the United Kingdom. If you love their product,
KKD's CEO has proven to be a turnaround specialist, and he's
done a great job over the past year. KKD caught up with all
of their SEC filings on 1.29.07, and is looking to the future
now. KKD refinanced old debt on 2.17.07. Lynn Crump-Caine
(a 30-year McDonald's veteran) and C. Stephen Lynn (former
Chairman and CEO of Shoney's and Sonic Corp.) were recently
elected for director posts. CFO, general counsel and board
member Bob Strickland have been replaced at KKD. June 4 earnings
report wasn't fantastic, however, the new team has a strong
pedigree in the restaurant business. Revenues for the first
quarter decreased 7.1% to $110.9 million compared to $119.4
million in the first quarter of last year. The net loss for
the first quarter was $7.4 million, or $0.12 per diluted share,
compared to a net loss of $6.0 million, or $0.10 per diluted
share, in the comparable period last year. 1Q earnings was
announced on June 4, 2007.
added to the S&P500 in August of 2007. Read "Sun
Powers Whole Foods,"
article in vol. 3, iss. 10. Silicon is in high demand, and
MEMC has been able to price its product and pick its customers
accordingly. On 7.25, the company reported earnings: 2Q net
sales were $472.7 million, which represents an increase of
7.3% from first quarter 2007 net sales of $440.4 million and
an increase of 27.6% over second quarter 2006 net sales of
$370.5 million. GAAP net income was $163.6 million MEMC will
receive $2.5 billion to $3 billion in revenue from sales of
the wafers over the 10-year period from Taiwan's Gintech Energy
(solar). MEMC also will be eligible to purchase a 10 percent
interest in Gintech, as well as acquire the rights to a parcel
of land of about 1.7 hectares, or about 4.2 acres, located
within the Hsinchu Science Park. Supplies silicon ingots to
Suntech Power Holdings, and owns a stake in that company as
well. The CEO has cashed out over $78 million, and plans to
continue to "diversify" his holdings through 2010.
Investors have cashed out over $3 billion. This is colossal
insider selling, however, after decades of solar energy being
out of favor, this may be the first time the investors have
been able to roll out their decades long investments. According
to Memc's Chief Executive Officer, Nabeel Gareeb, "I
am taking advantage of this open window to directly exercise
and sell approximately 10% of my outstanding options as part
of my estate diversification plan. I believe that MEMC remains
on a positive trajectory as indicated by the results over
the last five years, and I am confident about our future as
indicated by the long-term nature of this plan." Implemented
a 500 million share repurchase program in the 2nd
quarter of 2007.
information in vol.
4, iss. 9 in the REITs article
and accompanying stock report card. This is a company that
I featured in the April 2004 ezine at, believe it or not,
$29.89. There are rumors of a merger. We'll watch this in
the next few months to see if the merger comes to fruition
and/or if the Santa Rally pushes up the stock.
Pace's Exclusive Forbes.com
Video Network Q&A with Patrick Lo
(from August 2006). Award Heaven! Patrick Lo, CEO, won the
Ernst & Young's Entrepreneur of the Year Award (on 6.16.06),
NetGear is on Business Week's Hot 100 list (for the 2nd
year), NetGear was awarded Best Buy's Bravo Award for Business
Excellence and POPULAR MECHANICS just gave NetGear's Skype
phone its Breakthrough Award. The NETGEAR Skype WiFi phone
is available online. It's a great product that allows you
to connect to Skype and call anyone worldwide anywhere there
is a WiFi signal. An October report from Jupiter Research
predicted that 20.4 million U.S. households will subscribe
to some form of Internet-based broadband phone service by
2010. With all of the promising new products (Skype phones),
and the product alliance with Avaya, NetGear is poised to
continue strong growth.
TV and film studios, MySpace, and print publications. Just
sold DirecTV. News Corp. has completed $2.5 billion of a $3.0
billion buyback program initiated last June, and increased
the stock buyback program to $6.0 billion. DVDs include: Ice
Age: The Meltdown and X-Men. Theatrical hits include: Borat,
The Devil Wears Prada, Little Miss Sunshine, Napoleon Dynamite,
Die Hard and The Simpsons Movie. MySpace CEO Chris DeWolfe
and President Tom Anderson were our Executives
of the Year in 2006. Read
the article in vol. 3, iss. 1. Spam issues have lead California
teens to jump over to FaceBook. If Myspace were led by less
capable, passionate executives, I'd be plenty worried right
now. We'll monitor, but with the addition of video and the
strong music fan base, it's hard to imagine MySpace imploding.
According to Gabe, 17, from Santa Monica, "I use Facebook
more. It's become the easier thing. MySpace has been corrupted
by aliens - all of these hackers who send people adverts."
We'll keep monitoring. Next earnings report should be in August,
2007. We'll be reporting on the possibility of strikes
by the Screen Actor's Guild, Director's Guild and Writer's
Guild in the October ezine. The WGA contract is up on October
31, while the SAG and DGA contracts expire in June 2008, according
to Variety. Although the studios have all ramped up
production to stave off the effects of a strike by the unions,
a strike could certainly parch the investor appetite in film
companies, even if it doesn't cripple profits.
44. 1st featured Dec. 2002.
announced that they would be acquiring Opsware for $14.25/share
to Deloitte and Touche's prestigious Technology Fast 50 Program
for Silicon Valley on 10.26.06. It was announced on 2.13.06
that Cisco will distribute Opsware's products worldwide and
that the companies will collaborate on advanced network management
solutions built on Opsware's Network Automation System. CEO
Ben Horowitz said, in an interview during March of 2007, that
the Cisco deal just started kicking in August of 2006, and
that the best is yet to come. Opsware automates the complete
IT lifecycle and enables IT to automatically discover, provision,
patch, configure, secure, change, scale, audit, recover, consolidate,
migrate, and reallocate servers, network devices and applications.
Over 350 of the world's largest companies, outsourcers and
government agencies use Opsware to deliver this new, automated
model of IT. Read the Company
of the Year
article in vol. 1, iss. 44. Surpassed $100 million in revenue
for full year 2006 ($101.7 million), up 67% over the prior
near 52-week low.
2005 Company of the Year. Read vol. 1, iss. 56.
2Q 2007 earnings on July 30, 2007. Tarceva is the genetic
based "cancer pill," and sales have been exploding,
up to $402 million in 2006, after being approved by the FDA
in just 2004. OSIP is a partner of Genentech (DNA) and Roche.
OSIP is now testing Tarceva as an application for other cancers,
including lung cancer. Industry sales data has placed the
cancer drug market's value at more than $20 billion annually
and it is growing fast. Announced 1Q results on April 26,
2007 of net income of $19.7 million, compared with $376,000
a year ago. Revenues jumped to $77 million from $59 million
a year ago, an increase of 31%.
the article, "Golf
Carts and Sports Cars,"
from vol. 4, iss. 6.
and XM Satellite Radio issued a joint press release on February
20, 2007 saying that they will combine the companies, for
an "enterprise" value of $13 billion and net debt
of $1.6 billion. Mel Karmazin remains CEO of the combined
company, while Gary Parsons, the CEO of XM-SR, will become
the Chairman. The merger is being challenged in Congress and
hearings have begun in the matter. Sirius and XM issued a
joint release, saying, "The commission's published rules do
not prohibit one satellite radio licensee from acquiring control
of the other." Thomas Hazlett, the former Chief Economist
of the Federal Communications Commission, Professor of Law
& Economics at George Mason University, published a report
on June 14th saying that the merger increases audio
competition and will "predictably enhance consumer welfare."
This story is developing and we will keep you posted. In the
meantime, Sirius has launched backseat tv on Chrysler cars
beginning in 2008, and is a factory installed option for Land
Rovers and Mini hard tops. Reports earnings May 1, 2007. XM-SR
and SIRI both just posted a smaller loss due to a spike in
subscription revenue. (This was first reported on the home
page, in our Daily Bread quote section, on 4.30.07. Be sure
to check our home page daily for updates and information!)
the article in vol.
4, iss. 7.
Smith and Nephew are the first movers in the fast-growing
US hip resurfacing marketplace.
3, issue 4 and vol.
2, issue 9 for feature articles
on Sohu. Dr. Charles Zhang, the Chairman and CEO of
Sohu.com, is one of our CEOs
of the year in 2007. Read
the articles in vol. 4, iss. 1. You can watch a Q&A
Charles Zhang in an exclusive
interview I did on the Forbes.com
Video Network. Sohu was
selected as the official sponsor of Internet Content Service
(ICS) for the Beijing 2008 Olympic Games. Could be some
bumps in the road between now and Beijing Olympics 2008, which
should ultimately be worth it. Share price jumped in early
Holdings Co. Ltd (Green & Chinese Co. ADR)
4, iss. 1 for our Company
of the Year article, which
names SunTech the Company of 2007. Beat analyst earnings expectations
on 8.10.07. P/E to growth ratio suggests stock may be undervalued,
according to MSN.com on 8.10.07. Also, check out vol.
3, issue 10, and vol.
2, iss. 12 for our article
on solar energy. On February 21, 2007, Suntech's CEO, Dr.
Shi joined the Global Roundtable on Climate Change which is
part of the Earth Institute of Columbia University in the
City of New York. The Global Roundtable brings together more
than 100 high-level, critical stakeholders from all regions
of the world. On 2.15.07, STP announced that it had raised
$500 million in a public debt offering of senior note convertibles,
due in 2012. STP had to raise its offering due to strong demand
(a very good sign). STP and the University of New South Wales
signed a new $1.2 million collaborative research agreement
through 2007 with a $3 million extension through 2010. Suntech
will supply solar modules with an aggregate output of 23.2MW
to Atersa for installation in the Photovoltaic Grid Connection
Park in the Extremadura region of Spain, the world's largest
solar power plant. SunTech is also the official solar provider
of the 2008 Beijing Olympics, so expect that it will enjoy
a lot of buzz over the next 18 months. Announced earnings
on 8.9.07: total net revenues grew 147.7% year-over-year to
$317.4 million. Annualized PV cell production capacity expansion
is on track to reach 480MW by the end of 2007. "Our sales
demand has been so strong that we have already signed contracts
to deliver over 150MW of our PV modules in 2008. To put that
in perspective, that is nearly equal to Suntech's entire output
in 2006,'' CEO Shi said, commenting on the development of
"semiconductor finger technology." Dr. Shi is one
of our Executives
of the Year in 2007. Read
the article in vol. 4, iss. 1.
price jumped in early July 2007.
Price Em Eur & Mediterranean
2, iss. 8
4, issue 3 and vol.
2, issue 8 for articles on
why Eastern EU rocks, while Western EU stalls. Great way to
diversify, as well as to add growth. Go global with the emerging
countries. Avoid the countries in the EU that are stalling
in economic growth, like Germany and France. International
investing in the right sectors and countries pays off! Upgraded
to top Morningstar return rating in its category on 7.27.07.
Upgraded to Morningstar 5-star rating on 8.12.07. (We first
featured this rock star mutual fund back in August of 2005!)
3, issue 9, "eBay's
Outpaces News Corp.'s MySpace"
for a report card that features Time-Warner. TWX's The
Departed won Best Picture of the Year! AOL and Time-Warner
have finally figured out how to work together. Chairman &
CEO Richard D. Parsons, successfully fought off Carl Icahn,
and Mr. Parsons has proven to be a decisive and visionary
leader in other matters as well. On May 9, 2007, Chris Albrecht,
the former Chairman and CEO of Home Box Office, was let go,
after choking his girlfriend in Las Vegas at the MGM Grand
Hotel and Casino, after the Oscar de la Hoya and Floyd Mayweather
Jr. title fight. Karla Jensen, Albrecht's girlfriend, is declining
to press charges, but the LA Times reported that this was
the second choking incident of Albrecht's. Albrecht has apologized,
admitted that his behavior was inappropriate and will seek
help for his "drinking problem." TWX is buying back
company stock. According to Mr. Parsons, "We remain committed
to delivering superior returns to our shareholders by driving
execution, generating industry-leading operating and financial
results, and allocating our capital effectively. In addition
to targeting resources to key growth areas of our businesses,
our $20 billion share repurchase program -- which recently
surpassed one billion shares of our common stock bought to
date -- continues to be an attractive investment at current
price levels." In the 1st Q 2007, Revenues rose
9% over the same period in 2006 to $11.2 billion, led by growth
at the Cable segment. Net debt is still high, compared to
cash flow, at $34.0 billion.
4, iss. 4 for the article "Green
Hits the Mainstream,"
and vol. 3, issue 10, and vol. 2, iss. 12 for other articles
on solar energy. This is a profitable solar energy company,
based out of China. The international management team is very
strong, as are sales, growth and profitability. Share price
jumped in early July 2007.
the article, "Golf
Carts and Sports Cars,"
from vol. 4, iss. 6.
trading on the AMEX stock exchange on 12.11.06. (Also trades
on the Toronto Stock Exchange.) See the feature interview
and Chairman Rob McEwen in
vol. 3, iss. 2, and click to hear Natalie
Pace's Q&A with Rob McEwen
on the Forbes.com Video Network. Note: U.S. Gold is not producing
gold at this time; is it a gold exploration company, based
in Nevada. Rob McEwen, Chairman and CEO, was awarded the "Most
Innovative CEO" award in 2006 by Canadian Business magazine
in its fifth annual "All-Star Execs roundup." Motley
Fool added U.S. Gold to their "5 Low-Priced, High-Star
Stocks" on 2.6.07. As more press comes on board, the
price should reflect the wooing of Wall Street investors.
(Now, if the company strikes gold, we'll all be geniuses…)
"Our acquisitions are complete and US Gold's property has
grown from 36 square miles to approximately 250 square miles
in Nevada," said Rob McEwen, Chairman and CEO, in a press
release issued on 6.12.07. "Our drill results are similar
to early-stage discovery holes at major Nevada deposits that
host millions of ounces of gold. We are continuing our aggressive
drilling and exploration program at our top-priority targets:
Keystone, Limousine Butte, Gold Bar, and Tonkin." Read the
article above for more detailed info on this gold exploration
company. Rob McEwen, Chairman and CEO, was appointed to the
Order of Canada, the country's highest civilian honor on July
3, 2007. Rob is one of 71 new appointments announced by Her
Excellency, the Right Honorable Michaelle Jean, Governor General
of Canada. U.S. Gold was added to the Russell 3000 on July
Water & Power
off the boards
4, iss. 4 for the article Green
Hits the Mainstream, and vol.
3, issue 10, and vol. 2, iss. 12 for articles on solar energy.
This is a very high-risk company in the solar-energy/water
purification sector. CEO Quentin Kelly was invited by Governor
Schwarzenegger to join him on the Governor's tour of Canada,
during the California-Canada Conference on Clean Technologies
in Vancouver. Mr. Kelley was selected due to WWAT's leading
role in building prominent solar energy projects in California,
including the recently-announced Fresno airport solar complex
as well as the largest solar-powered agricultural system in
the world and only self-sustaining water utility. Announced
on August 9, 2007, that they would be delivering 10 Mobile
MaxPure units for use in Darfur, Sudan. The portable solar
driven water pumping and purifying units, purchased for an
aggregate of $775,000, will provide approximately 30,000 gallons
of safe drinking water daily at each of 10 sites across the
ravaged desert region. Deliveries are scheduled for late September/October
with installation in October/November. Financial terms of
the contract were not disclosed.
Clean Energy Portfolio (Green ETF)
3, issue 10, and vol. 2, iss. 12 for articles on
solar energy. This is a well-managed "smart" ETF,
which updates its holdings regularly, but falls and rises
on the good or bad news of alternative energy companies which
it may not even hold in the portfolio. Fell earlier this year
on bad news at Evergreen Solar, with regard to silicon supply,
even though Evergreen Solar was not a major holding. Top holdings
on 1.12.07: SunPower, OM Group, Ballard, Energy Conversion
Devices, SunTech, Ormat, Evergreen, Ormat and MEMC Electronic
vol. 4, issue 3, "Money
Grows on WisdomTrees."
This is a well-managed "smart" ETF, which updates
its holdings regularly, and trades on earnings instead of
market cap. Trading off the boards with a war chest of capital
and a former SEC chairman as one of the senior advisors.
just re-added Yahoo to the list effective 6.15.07. Over the
past few years, Yahoo has waxed and waned (and as a result
has been on this list and on the Cooling Off list). New President/former
CFO Susan Decker reports that,"As we look ahead, we are very
excited about the transformational changes taking place on
the Internet, creating greater opportunities for both users
and marketers, and we are confident that Yahoo! has the right
combination of assets to help lead this evolution." Yahoo
execs have been saying that for years now, and still under-delivering
relative to their peers, like Google, but with Terry Semel
coaching (as non-executive Chairman) and Jerry Wang leading
(as CEO) can Yahoo jumpstart their stalled potential? Why
do we believe her this time? eBay's CEO Meg Whitman has just
put a lot of ads on Yahoo, which were previously the exclusive
domain of Google. According to the Associated Press, the move
is "a test to see whether it could get more bang for
its buck if it increased its spending on other search engines,
including Yahoo, IAC/InterActiveCorp.'s Ask.com and Microsoft
Corp.'s MSN." If Yahoo really does have their game together
this time, then the ad dollars might stick around and even
grow. We'll keep reporting more, but with the sleeping giant
Yahoo, which still tops the Internet sites with registered
users, time online and page views (along with Google, Myspace,
AOL and MSN), even the first sign of waking is worth noting!
Former CEO Terry Semel stepped down officially on June 18,
in an amicable move, without taking a severence compensation
with him. The Financial Times reports that his compensation
package of $71.7M in 2006 was the highest among S&P500
chief executives surveyed by The Associated Press. Semel has
already exercised options valued at more than $450 million,
not including the 2006 compensation (so he can afford to "resign"
and forego the severance package). The new advertising platform,
code-named Panama, is expected to help revenues in the current
quarter, according to the Financial Times.
SNE) and Sunoco (NYSE: SUN) both had great runs for the list! LifeCell
(NASDAQ: LIFC) posted over 180% gains before being moved to the
Cooling Off list. Bioteq Environmental (TSE: BQE) had 144% gains.
Rio Tinto was removed on 11.15.2006 with 145% gains. Las Vegas Sands
was removed on January 5, 2007 with 139% gains, Agilent on 2.1.07
with flat performance, and RELM Wireless was taken off with 3% gains
on 2.1.07. Blockbuster ran up 82.5% in gains, which we cashed in
on February 12, 2007. Intuit, deleted in June 2007, was a wash for
us - up and down. Macerich posted 150% gains between May 2003 (when
it was first featured) and September 2007 (when it was removed from
Get more information in vol.
4, iss. 9 in
the REITs article. We first featured Macerich in May of 2003,
when it was trading at $33/share. In September, the signs
were pointing toward a cooling off in retail shopping center
Companies. The companies that are listed are worthy of watching
and might be worth buying in on opportunity (i.e. at a better price),
if you believe the news on future potential. 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
Electric added on 8.1.07
added on 9.1.07
Properties added on 9.1.07
Price when featured
Gains since original feature
Advanced Micro Devices
Read the "Apple
Chips" article in vol. 4, iss. 2 for our take
on the current battle between AMD and Intel. AMD's strategy
of litigate to win loses, in our view. In tech, the geeks
beat the suits. Better products win, not lawsuits. The most
recent losses that AMD has taken (due to an acquisition they
made and the price squeeze on products that Intel put them
in) have also led to rumors that the company is in a cash
crunch. Intel looks more promising in today's climate, if
the price is right, but AMD is worthy of keeping an eye on.
AMD's sales were down from $5.8B in 2005 to $5.6B in 2006.
Intel is now on our Hot News list. AMD is betting on the Barcelona
chip for its recovery. There was a special meeting for
stockholders being held on July 16, 2007 in Austin, TX.
The line item under discussion at the meeting is an amendment
to the Advanced Micro Devices, Inc. 2000 Employee Stock Purchase
Plan. Chairman and CEO Hector de J. Ruiz received $12.8 million
in compensation in 2006, according to the Proxy Statement
filed with the SEC on 5.31.07. Dave Orton, the former president
and chief executive officer of ATI Technologies, resigned
as executive vice president, effective the end of July, on
7.10.07. ATI was acquired by AMD in October 2006.
Get more information in vol.
4, iss. 9 in
the REITs article. Boston Properties looks great. Think that
the office building REITs may begin to come under pressure
sometime in 2007. Will be monitoring cash flow, capital spending,
productivity, salaries, GDP growth and other signs of the
business economy, which are the customers of Boston Properties.
See the article, "Green
San Jose Company," in vol. 4, iss. 8.
As you can see from the 52-week
high, GG's price is not unreasonable, however, we like keeping
an eye on good companies like this, just waiting for weakness
in the sector to cause a more attractive buy-in rate. Goldcorp
used to have more upside potential, in our view, than most
of the other larger gold companies, like Newmont. For a high
risk gold exploration company (i.e. they are LOOKING FOR GOLD
not mining it yet), check out U.S. Gold on the Hot News list.
Reason for being on the sidelines? Goldcorp missed earnings
expectations two quarters in a row, the expectations for the
current quarter were decreased and the P/E is now 54.70 (high).
The gold sector might be overvalued, and the unfortunate mining
accident in Utah reminds us of the human element of this sector.
Vol. 1, iss. 55
The FDA issued a warning on "unscreened
human tissue" on 10.26.05. LifeCell reported a recall
of products, and took a charge of $1.4 million in 3Q ‘05 to
reflect the recall. LifeCell's product is in high demand and
sales are growing rapidly, however the story on some of the
unscreened and untested tissue it received from Biomedical
Tissue Services is not over. According to the Associated Press,
the FDA shut down BMT for not screening the tissue for communicable
diseases, among other violations. Lawsuits have been filed
by some plaintiffs who unknowingly received products from
Biomedical Tissue services and the impact of those lawsuits
is still largely unknown. LifeCell has set up a testing program
for anyone who received the BTS donor tissue. LifeCell has
been named in "several" lawsuits related to this
matter, according to the earnings report filed on 10.26.2006.
"There can be no assurance that the level of insurance
maintained will be sufficient to cover the claims or that
the all of the claims will be covered by the terms of any
insurance." There has been at least $15.5 million in
insider sales by CEO, CFO and controller in last 12 months.
LifeCell has a great product in high demand, but the potential
fallout of the unscreened human tissue could be more than
most small capitalization companies can take. The 4Q Earnings
call on April 25, 2007 is available for you to listen to.
Call (877) 704-5379 to listen in. Replays are available at
(888) 203-1112 or (719) 457-0820: The replay access code is
4423963. The FDA issued "501k clearance" on a new
LifeCell soft tissue regenerative (repair) product on June
13, 2007. We'll do a full report on LifeCell for the August
Get more information in vol.
4, iss. 9 in
the REITs article. We first featured Macerich in May of 2003,
when it was trading at $33/share. In September, the signs
were pointing toward a cooling off in retail shopping center
REITs, so we removed the company from our Hot News list (meaning
that we're capping the performance at 150% gains). There is
a good chance that the Santa Rally will enthrall investors,
and push the MAC price up, even though it is in the decidedly
unpopular REITs industry. We'll look to putting MAC on the
Cooling Off list in January 2008, or if interim news warrant
World's largest software company.
$31 billion in cash. Launched Zune on Nov. 14, 2006 and Vista
earlier this year. New products have not received "buzz"
or outstanding sales. The latest ruling that Microsoft has
to pay $1.52 billion to Alcatel Lucent is a blow to any music
service that didn't license MP3 technology with Alcatel, including,
potentially, Apple. Great blue chip for your long term portfolio
because with the war chest and talent at MSFT, even this year's
assembly line of flops shouldn't bring the company down, although
it may bring out the firing rod. Will pressure come down on
Steve Ballmer, CEO? Trading at a 52-week high, so waiting
for a better buy-in opportunity might yield better returns.
Off Stocks List (may be Poised for a Decline in Share
The companies listed in bold have recently been added to this cooling
off list and/or may be currently poised for a decline in value.
Investors who have them in their portfolio should read the recent
news and consider whether it is time to sell and take profits, dump
losses, short the position and/or simply weather the storms, while
keeping the company in their long-term portfolio. At any rate, always
consult your certified financial partner before making adjustments
to your portfolio. (Again, note, that the stocks on this chart are
expected to go DOWN in price.)
on 7.16.07. Deleted on 8.1.07 with losses of -6.7%.)
Companies (Cooling Off List):
Price when added to Cooling
Spending $1 billion on accounting
fees related to the accounting scandal. Fannie Mae is behind
on filing 2005 and 2006 annual reports. If it fails to file
the reports by December 31, 2007, the company could be delisted.
(In the meantime, FNM is subject to quarterly review by the
NYSE.) And yet investors are still in to the tune of $58.44
billion…. Are you? Better check your mutual funds. The recent
subprime lending fallout doesn't bode well for FNM. According
to the AP, "Maintaining strong asset quality position
will be a challenge for Fannie Mae, given the recent weakening
of housing values from the very strong levels seen over the
last few years." Standard and Poor's has a negative outlook
on Fannie Mae.
See the article "Faded
Blue Chips" in vol. 3, issue 8. Almost every
risk factor which GM listed in the annual report has occurred
- prices for parts are higher due to the metals commodity
crunch and gas prices have turned consumers to gas efficient
vehicles. GM still has an enormous overhead that impedes its
ability to be profitable in the global landscape. Toyota has
exceeded GM in profits for years. This year, Toyota beat GM
in sales as well.
CEO Bruce Karatz resigned under
pressure Oct. 2006, after SEC investigation of backdating
options. Read the article, "Rupert
Murdoch, Nobel Laureates and Top Real Estate CEOs. Find Out
Where They Are Investing," from volume 2, issue
5. In May 2005, we called REITs a burnout sector, and the
fallout should continue, with high home prices, rising interest
rates, people backing out of contracts and rising inventory.
On June 28, 2007, KBH reported a loss from continuing operations
of $174.2 million or $2.26 per diluted share in the second
quarter of 2007, largely due to a pretax, non-cash charge
of $308.2 million related to inventory and joint venture impairments
and the abandonment of land option contracts. In the second
quarter of 2006, the Company generated income from continuing
operations of $184.4 million or $2.20 per diluted share. Revenues
totaled $1.41 billion in the second quarter of 2007, down
from $2.20 billion in the year-earlier quarter, due to a decline
in housing revenues that was partly offset by an increase
in land sale revenues.
See the article (Sub)
Prime Time in the May 2007 ezine, vol. 4, iss. 5.
On July 27, 2007, Novastar announced a reverse stock split.
As a result of the reverse stock split, every four shares
of common stock were changed into one share of common stock.
Robert Toll, CEO, and brother Bruce
Toll have been on an insider selling spree, totaling hundreds
of millions, since May 2005 (source: MoneyCentral.Msn.com).
Read the article, "Rupert
Murdoch, Nobel Laureates and Top Real Estate CEOs. Find Out
Where They Are Investing," from volume 2, issue
5 in 2005, when we first reported on REITs as a burned out
sector. There is a pending securities action complaint, from
June 2007, alleging that Toll Brothers "and one or more
members of its senior management, violated federal securities
laws by issuing various materially false and misleading statements
that had the effect of artificially inflating the market price
of the Company's securities and causing Class members to overpay
for the securities." On August 22, 2007, TOL will announce
2Q earnings. You can access the call on their website at:
companies were taken off of the Cooling Off list effective 10.16.06:
Verisign (+15%). IMClone (-11%). Yahoo (-28%). LifeCell was removed
on 7.2.07 with -4.5% overall performance. (The cooling off list
anticipates that a company will lose share price value.) Google
was added on 7.16.07 and then removed on 8.1.07 with losses of -6.7%.
TO PRICEY TOO BUY! So, why isn't
it still on the Cooling Off list? Because investors have a
short-term memory, and this is a very popular stock. We'll
likely move Google over to the Watch List for the next three
months, until the next earnings report, which should be released
around 9.18.07. Google is a great long term hold for your
portfolio, which is why it is still on the Hot News List as
well. The question now is when do you buy in and when do you
avoid buying high? Since January 2007, there have been over
650 "Statements of Beneficial Changes in Ownership"
filed with the SEC. That is a colossal insider selling, which
Google warned about three months ago. This exercising of options
will be part of the earnings call for the 2nd quarter
of 2007, on July 18th. Additionally, eBay just
pulled a large block of ads that were on Google, and placed
those ads on other search engines, like Yahoo, MSN and AOL.
The loss of revenue should be under 2%, according to analysts.
The conference call to discuss the results is taking place
after the closing bell, at 4:30 p.m. ET. Google joined the
S&P 500 on 3.31.06. Great Blue Chip Hold for your long-term
portfolio. Owns YouTube.com, one of the most popular sites
on the web, which just got hit with a billion dollar lawsuit
from Viacom on 3.13.07. Dr. Eric Schmidt was one of our Executives
of the Year
in 2007. Read the
article in vol. 4, iss. 1. The growth continues to be amazing,
and the share price continues to be amazingly volatile! The
savvy day-trader would buy on disappointment and sell on hot
headlines. The long-term investor would buy at the 52-week
low and hold to will to the kids. (Notice that Google is NOT
highlighted and is not considered to be a good buy right now.
In fact, even though the markets have been a rocket ship this
year, and that ride is expected to continue, Google's 2Q earnings
call could be very disappointing. Investors typically are
not too attentive to Google's warnings - even though Google
is good about forewarning investors. Investors do, however,
react strongly to Google's news! The last time Google missed
earnings, on January 31, 2006, the investors sold off over
$16 billion overnight. (That is why Google is on the Cooling
Off list effective July 15, 2007, in addition to being on
this Hot News list as a long-term hold.) You can listen to
a webcast of the April 19th earnings call at http://investor.google.com/webcast.html.
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, and consider your long-term goals and strategies.
IMPORTANT DISCLAIMER: Information has been obtained from sources
believed to be reliable however NataliePace.com 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.
and Promote Peace and Prosperity at The 2007 Solar Conference, the
U.N International Day of Peace and the Blue Chip Stock Chat with
Kelley Wright: just three of many amazing September events.
NataliePace.com Calendar section features conferences, retreats,
educational opportunities, cultural events, galas and online chats
with executives and VIPs. Stay plugged in! Visit our calendar section
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to the event website and registration, go to the Calendar
section at NataliePace.com.
Chat with the No. 1 Blue Chip Stock Picker on Wall Street
September 12th, 2007
through 9:30AM PT
has the highest risk-adjusted returns for the past 25 years. Their
focus is dividend-paying Blue Chips. Chat with Kelley Wright and
learn how you can mirror his returns for the price of a stock newsletter!
September 15th, 2007
in an historic citizen lobbying effort to create a U.S. Department
of Peace, which will provide practical, nonviolent solutions to
the problems of domestic and international conflict.
Open Market Committee Meeting
September 18th, 2007
through 5:00PM ET
Reserve Board governors meet to determine whether inflation is more
of a factor than the housing pullback and subprime defaults. Will
the Feds keep the rate where it is, raise it or lower it? Wall Street
analysts are divided in their predictions.
Teleconference with Natalie Pace
September 19th, 2007
through 6:00PM PT
call-in instructions from Heather@NataliePace.com. Wonder where
the stock market is headed? Want to get in on stocks like Opsware
and World Water BEFORE they post 100% to 600% gains? Want to learn
more about the January Living the Rich Life Retreat, the 3-ingredient
foolproof recipe for cooking up profits and/or how to read the Hot
News on Cool Stocks article?
Day of Peace
September 21st, 2007
21 has been designated as an international day of peace by the United
Nations, wherein all countries are to observe a global ceasefire.
More than 3500 Peace Day events took place in 200 countries in 2006!
Peace, Kirtan, TranceDance, Meditation in L.A., CA
September 22nd, 2007
through 11:00PM PT
presents a day of yoga, kirtan, dance, meditation, raw/vege food
and more in a 12-hour ritual peace fundraiser at the solar-powered
LA convention center.
Conference 2007, Long Beach, CA
September 24th, 2007
through 7:00PM PT
Power 2007 features over 175 exhibitors, 125 speakers, networking
opportunities galore, and an anticipated 10,000 visitors! Almost
every major solar company in the world, from Suntech Power Holdings,
to Sun Power to GE Solar will be there on display!
just a few of the MANY exciting conferences, events, galas, opportunities,
chats etc. going on. Go to the Calendar section at NataliePace.com
regularly to stay on top of recent updates and opportunities.
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