Agog Over Google:

Risks, rewards and instructions for participating in this year's star IPO.

By Paul Woods, President & CEO of Odyssey Advisors, LLC.
pwoods@OdysseyAdvisors.com

It's baaaaaaack. While investors have been obsessing about higher interest rates, the conflict in Iraq, and the upcoming election, the market for Initial Public Offerings (IPOs) has been making a quiet comeback this year. In the first quarter of 2004, there were 30 IPOs valued at $7.8 billion versus 6 IPOs valued at a $1 billion a year ago. This time around, the appetite for risk is limited, as investors want to see earnings instead of hopes and dreams. As a result, most IPOs have been solid, profitable, and relatively boring companies.

Google Lobby: lava lamps and beanbags

hat changed with the recent announcement by Google. This will be the largest IPO in years, the Dutch auction format will give the public an equal chance to buy shares, and Google is anything but boring. Early in the 171 page preliminary prospectus is an income statement for the last three years. It's nothing short of dazzling, growth is spectacular and the company is solidly profitable. However, like the gorgeous starlet at the awards ceremony, the founders then proceed to ruin it by opening their mouths.

On the basis of a few years running a search engine, the founders have decided they belong in the same category as Warren Buffet. They have also created an owner's manual that explains the structure of the company and their long-term focus. They go on to mention that they don't have employees, they have Googlers. Their mission isn't anything as mundane as making money. They want to make the world a better place while not being evil.

[Ed's note: Google posts a lot of information on company culture on their web site. Two of their "Ten Things Google has found to be true" include: "Democracy on the web works," and "You can make money without doing evil." To read the complete document, go to: www.google.com/corporate/tenthings.html.

In spite of all this altruism, it's pretty obvious that the Dutch auction method was selected in order to allow the founders to get as high a price as possible for their shares. We're fans of capitalism and don't have a problem with this. At the same time, a case can be made that a lot of the statements in the prospectus appear designed to create a cult-like following and hype the stock among the unsophisticated.

Two Stanford University graduates founded Google in 1998. They added some experience in 2001 with Dr. Eric Schmidt, the former CEO and Chairman from Novell, who had previously served as chief technology officer at Sun Microsystems. [Ed's note: Google's board also includes Silicon Valley heavyweights, including Intel's COO, Paul Otellini, Genentech's Chairman and CEO, Arthur D. Levinson, Ph.D., and Stanford University's provost and chief academic and financial officer, Dr. John L. Hennessy.] However, management is by triumvirate, and the founders are in control with 2 of the 3 votes. They will remain in control after the public offering, as they own a separate class of shares with 10 times the voting power of the stock being sold to the public. It appears that the founders are happy to take all the money less sophisticated investors will throw at them, but have sense enough not to give those investors much voting power.

Googlers At Work

The Good
Google is hot for a reason. They developed a better search engine that finds relevant information and filters out the junk. They don't irritate their users with pop-up ads and found a less annoying way to deliver advertising. The name Google has become almost synonymous with search, but the ads disguised as the result of a search now account for about 95% of the company's revenues.

Unlike a lot of .com companies that never had a coherent business model or profits, Google became profitable in 2001 and grew at triple digits during the recent bloodbath in companies tied to the Internet. In a very tough business environment with even tougher competition, Google's business grew at almost 270% per year from 2000 through 2003 as revenues increased from $19 million to $962 million.

Google has created the most popular search engine, but e-commerce drives their revenues. Although e-commerce became a four-letter word a few years ago, the potential market is still huge. In the first quarter of 2004, Internet advertising revenue was up 39%, to $2.3 billion, according to the Interactive Advertising Bureau and PricewaterhouseCoopers (5.24.2004). Combining advertising with a search engine allows advertisers to specifically target their market, and the overall market for advertising is enormous. As Google's share of this market increases, they have tremendous room to grow.

The Bad
Most of our concerns have to do with things we found later in the preliminary prospectus. In particular, the founders' seem to have a fixation that their company is a cut above and the normal rules don't apply. There are 20 pages of risk factors in the preliminary prospectus. For us, the biggest concerns are slowing business growth, eroding profitability, and Google's unwillingness to play the game of managing expectations.

It's no surprise that growth will slow down and 2004 will be the last year of triple digit growth. What is surprising is that Google suggests that profitability may also begin to erode in the future. In English, this means that Google's revenue (business) growth will probably be less than 100% in the future and that earnings are likely to grow at a slower rate than revenues.

Google's disdain for managing expectations translates into two things. First, they will not provide forecasts of future revenues or earnings. Second, they will not manage earnings to smooth out what's reported. While we're delighted that analysts will actually have to analyze for a change instead of being spoon fed by corporate public relations departments, this is still a disturbing combination.

[Ed's note: In Google's Letter to Prospective Shareholders, they write: "Outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly market expectationsÉ In Warren Buffett's words, ÔWe won't smooth quarterly or annual results: If earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you.'" To read the entire Letter, go to: www.thestreet.com/markets/marketfeatures/10157519_2.html]

This stock will have a high valuation because of Google's record and its prospects. However, high valuations leave no room for disappointment. Experienced managements deal with this by delivering more than promised when earnings are reported, and choosing not to play this game is a huge gamble.

[Ed.'s Note: Silicon Valley CEOs and analysts at American Technology Research value Google's IPO at $30 billion.]

The Ugly
There will be earnings forecasts whether Google is involved in the process or not and investors in overpriced stocks typically don't handle disappointment very well. If Google chooses not to keep expectations realistic and then misses earnings estimates by even a penny per share, hundreds of millions and potentially billions of dollars of shareholder wealth could easily be wiped out in a nanosecond.

What's it Worth?
We think the most comparable publicly traded company is eBay. They also grew rapidly during the downturn in technology spending and are also a key player in e-commerce. Their business is a bit more mature, but eBay still has the best business model we've seen on the Internet. From this point, the two may have similar rates of profit growth, but we have more confidence in eBay's management. As a result, we feel that Google should sell at a discount to eBay.

Currently, eBay trades at about 75X the consensus estimate for earnings in 2004 of $1.18 per share. For reference, most stocks are trading at less than 20X earnings at present. The earnings used by Wall Street for Google were 51 cents per share in 2003. In the first quarter of 2004, earnings for Google more than doubled. To be conservative, lets assume that Google earns $1.00 per share for 2004. Keeping in mind the current valuation for eBay, we think $60 per share is the upper limit of what Google stock might be worth, and that's pushing it.

If You Gotta Have it
If you want to own the stock, the process will work something like thisÉ.

• Open an account with one of the two underwriters, Credit Suisse First Boston http://www.csfb.com/ or Morgan Stanley http://www.morganstanley.com .
• Obtain a prospectus detailing the investment's risks, as well as the underwriter's account eligibility and suitability requirements. This will be available electronically, according to the company.
• After receiving the prospectus and sometime before the auction, bidders must obtain a "unique bidder ID." Bidder IDs will not be available after the bidding begins.
• Once you qualify, you're able to bid when the auction starts. The bid you make must include the number of shares you want and the price you're willing to pay for them.
• The final IPO price will be determined after the auction closes. The underwriters will calculate it by gathering all the bids and calculating the cut off point at or above which all the shares available can be sold.

Let's assume that Google settles on an allocation of 150 million shares, but receives bids for one billion at a range of prices. Only the highest bids adding up to 150 million shares will count as winning bids. The IPO price will equal the lowest price bid on any of those 150 million shares, even for those that bid higher.

For example, assume that there are 10 buyers for 5 items. The first bidder bids $1, and then each bidder increases the bid by $1. The result is a range of bids from $1 to $10. In a Dutch auction, the five items would be sold for $6 each to the five highest bidders.

The upside of this process is that winning bidders will have the knowledge that most successful bidders would have paid more for the stock. As a result, there would appear to be some built in upside for the stock. The unknown is whether or not some people will make unrealistically high bids in order to get the stock, which could easily set it up for a fall.

Conclusion
The key to success in any auction is to know what you're willing to pay and not getting caught up in a bidding frenzy. If someone is willing to pay more for something than you think it's worth, let them. Valuation is subjective, and our guess is that all the hype and the Dutch auction process will produce an overvalued stock.

It's in the interests of everyone for an offering this large to be successful, as a healthy IPO market will provide the capital to help small companies create more jobs. However, a successful offering means that there has to be enough left on the table for investors to make some money while also making certain investors aren't hit with an unpleasant surprise. We hope we're wrong, but we are not convinced that either of those two things has been done here. In addition, there's the other small problem of being asked to buy something without being told the price. As a result, we plan to let Google go up without us.

For disclosure purposes, it should be also noted that our firm has a large holding in eBay.

[Ed's note: Other NataliePace.com writers and editors find Google's philosophy more palatable than Paul Woods. For a different perspective on Google: the People's IPO, click here.]

Einstein Meets Edison:

Genius Entrepreneurs. Think it's all about Bill Gates and Microsoft? Wonder if Google made the Top 10 Patent's list? NataliePace.com's TOP 10 List & Stock Report Card Combined!

by Natalie Pace, CEO, NataliePace.com

The World's First Running Humanoid Robot by Sony

or the 11^th straight year, IBM (International Business Machines) topped the U.S. Patent and Trademark Office's list of companies, receiving the most U.S. Patents in 2003, at 3,145 patents,70% more than 2^nd place finisher, Canon Kabushiki Kaisha. Whether it's in-house or wheel and deal, the Big Blue manages to take the blue ribbon year after year. Meanwhile, Microsoft wasn't in the top 10 this year or last year, and neither was upstart Google or Google competitor, Yahoo. 2003 marked the first year that Intel showed up on the Top 10 Patents received List, with an outstanding 48% increase in patents in 2003 over 2002. Hewlett Packard climbed four spots from 2002, up to the 5^th position, while Micron Technology, Inc., the only other U.S. company on the list, slipped from 3^rd to 6^th position. Nope, Dell wasn't on the list this year or last.

Top 10 Private Sector Patent Recipients for the 2003 Calendar Year (www.uspto.gov)

Sony's Home of the Future

Also, as witnessed by Sony's run-up of 350% from January 1999 to March 2000, Sony is a big company that knows how to win public approval and sprints in share price. There could be significant upside over the next two years, if Sony's new digital wave becomes a tsunami.

For more information on Sony, click here to go to NataliePace.com's feature article in December, 2003.

Best NYC Hotel Experience:.

Le Parker Meridien. The ultimate NYC experience with delicious, tongue-in-check surprises at every turnÉ

By Natalie Wynne Pace, CEO, NataliePace.com

Parker Meridien's Gravity Pool

nce in a lifetime, you've got to stay at the Plaza, just to hear the clippity clop of horse-drawn carriages outside your window, have the best view of Central Park and don gloves for traditional afternoon tea, ala children's book star, Eloise. Equally important, is the Waldorf=Astoria weekend, replete with gracious, efficient staff, Cole Porter's piano and the lively NYSE stock ticker circling the great bar and restaurant, the Bull and Bear. So if you're traveling to New York City for a once-in-a-lifetime occasion, pull out your credit card, and book a reservation at one of these landmark hotels. Plan on paying richly.

If, however, you want the ultimate NYC experience, minus all the pomp and circumstance or fancy dress code, swimming in in-crowd, hip surprises at every turn, Le Parker Meridien is THE place in NYC. Rooms have views of Central Park (walking distance). A central mid-town location. The best gym of any hotel in America, and one of the only pools in an NYC hotel. The best breakfast on the planet. A burger joint that feels right out of Saturday Night Live (and has been known to have SNL players eating there). A French bistro and bar. Just when you think that Le Parker Meridien couldn't possibly have more to offer, you find out the high-speed Internet connection is FREE, and better yet, easy to connect to, with an IT support staff that can trouble-shoot connectivity problems without wasting your entire day.

For the business executive, and really most travelers these days, Internet connectivity is a deal-breaker. At the New York City Hilton, Internet service was $9.95 per day, but the connection was so unreliable that I had to run up to the Executive Lounge, the only Hot Spot in the place, to send important email documents in the middle of the night. Not fun! When I called to get the service fixed, the support team couldn't trouble-shoot it. If the Hilton's Executive Lounge didn't have such a fantastic Continental breakfast spread each morning (fresh fruit, fantastic pastries), I would have made a mad dash to switch to a hotel with more reliable Internet service. As it is, the Hilton is unlikely to get a return visit from me, unless it pops up unexpectedly on my Priceline bid.

At the Plaza, Internet connection was $24.95 per day, the most expensive, and the computers were embarrassingly slowÑlow on memory and old. Fortunately, I had my own computer, which worked beautifully with the high-speed connection. However, you'd think the most expensive IT service would perform the best, not the worst. The Waldorf Astoria's high-speed connection and IT support team is impressive, but the service runs $9.95 per day, and is certainly no more impressive than the FREE Parker Meridien perk.

Uptown, not uptight, is the Parker Meridien motto, which means your experience is designed to be delightful and memorable from the moment you hit the elevator with Rocky and Bullwinkle on the tele, to the moment you place your Fuhgetaboutit sign on your hotel room door, to the delectable breakfast fare at Norma's (best breakfast in NYC)É Not that they are known for good taste, but Jessica Simpson and her hubby, Nick Lachey, are just a few of the celebrities who make Le Parker Meridien their NYC hotel of choice.

To book a reservation, call 212.708.7460 or visit the hotel online at www.parkermeridien.com.

Success Secrets of CEOs:

Q&A with Steven Pipes, General Manager, Le Parker Meridien. Nice Guys Finish First, and have lots of fun with their staff...

By Natalie Pace, CEO, NataliePace.com

So, just how can a hotel provide so many amenities at such high quality FOR FREE, while others add on ten bucks every time you eat, work out or plug in? How can you have the best breakfast in NYC, a burger joint with a lunch line out the door every day AND the best gym of any hotel in America, all for less money out of the traveler's pocket than the more traditional high-end NYC hotel? We asked Le Parker Meridien General Manager, Steven Pipes, to shed light on just how he manages to pile up so many hard-to-achieve milestones, while keeping his hotel so cool chic.

Parker Meridien's Lobby

all me addicted to tabloid, but I expected to see a snappy, sharp-talking, weasel when I walked into Mr. Pipe's office. Instead I was met by a man with a grin wider than Texas, who wears a wedding ring and boasts of his 27-year marriage. Steven Pipes doesn't look old enough to be married 27 years, and when he chuckles over the brainstorming sessions he has with staff, coming up with wacky names for the Norma's breakfast creations, you wonder if he isn't merely a kid trapped in a grown-up's body suit. His hotel is decidedly more urbane than he is, with it's soaring lobby space, cherry paneling, hand-painted columns, modern artwork and sophisticated, international clientele. However, it is the tongue-in-cheek humor of Le Parker Meridien's elevator entertainment (Charlie Chaplin & Rocky and Bullwinkle), menu selections, Burger Joint and Privacy signs (Fuhgettaboudit) that make the guest a part of something exclusive, ultra-fun. You leave your stay feeling protective about sharing such a find with only your closest friends. Who would have thought that such a chic world could be dreamed up by one of the nicest guys in the business? Or is that, in fact, Steven Pipes secret to successÑnice guys finish first, surrounded by their friends?

And if you think the Parker Meridien is just for the sophisticated professional, Fuhgettaboudit! Rooms have free gaming devices and DVD players, guaranteed to spark entertaining remote control wars for the family.

Q: Your motto is "Uptown, not uptight." When I'm standing in the lobby of the Parker Meridien, it feels regal and timeless, and when I'm standing in line at the Burger Joint (one of Parker Meridien's eateries), I could be stuck in a Saturday Night Live skit. How did you ever imagine that these two worlds might collide to create one of the most sought after hotel destinations in New York City?

Pipes-- Basically in 1998, we--the owners and the team here--really started thinking about who are we, how we fit in the market and what we could do to differentiate ourselves. The conclusion was obvious. We really are the only major New York City hotel that is family-owned, locally-owned and not bought and sold every three minutes, like all of the other hotels in town. We really have the ability and the agility to create things that are different and to do things that are offbeat--that excite us. We don't have to fit into a framework imposed by others.

But how did you get so many things right (Norma's, the Charlie Chaplin/Bullwinkle entertainment in the elevators, the greatest gym, the secret "Burger JointÉ")? You're affable and energetic, but I wouldn't describe you as the epitome of coolÉ

Pipes--The success of hotels going back 20-40 years ago was sameness. With the Holiday Inn and Hilton, no matter where you went, from Bangalore to the Cleveland Hilton, you knew what you were going to get. Today, travelers who are going to major urban areas are looking for a different local experience. They're sophisticated travelers who are not looking forward to waking up and going, "Where am I?" They want to feel something unique about where they are. We have the ability to do that in a way that others don't. We said, "Let's blow up everything we've done, and recreate ourselves starting from one end to the other."

Sounds like a blastÉ The Parker Meridien has been at the forefront of hotel innovation since it opened, hasn't it? It was credited with starting the trend of bringing celebrity chefs into hotel restaurantsÉ

The hotel opened in 1981 and had a restaurant called the Maurice. It was the first hotel to bring in a Michelin three-star chef--Alain Senderens. It put the hotel on the map.

And the restaurants today are just as memorable. Norma's was voted as "Simply The Best Breakfast In New York" By The Zagat Survey 2003. You have Seppi's, a French bistroÉ

[With Seppi's], we really wanted a restaurant that is a neighborhood place, where you could eat three times in the same week. You can go in a suit, elegantly dressed or jeans. You can eat late. The food is great.

With Norma's, our goal was very simply to attempt to create the best breakfast in New York City. We took every normal dish that you associate with breakfast and said, "How can we make this a memorable meal?" Local New Yorkers, as well as our guests, just flock to the place. On weekends, we'll have 50-70 people waiting to get in. We will do over 600 people on the weekend, per day. Norma's allows you to treat yourself to something special, and yet at the same time you're not spending $100 per person. It isn't really expensive when you see the whole package you're getting.

[NataliePace.com tip: Hotel guests are advised to call ahead and be put on Norma's waiting list BEFORE they come down, especially on the weekend.]

Guests get location and luxury, a view of Central Park, walking distance to Rockefeller Center, free DSL, DVD, Play Station, a pool and the best gym in New York hotel, but the other side of the Parker Meridien difference is the ambience, staff and "feel."

We try very hard to allow you to do your business, but in a comfortable way. The chair is comfortable. The check in is efficient. Great restaurants. Fun. Attitude. Staff that is not familiar, but not stuffy and pompous. Our health club, Gravity, is far and away superior to our competitors.

Just when you think the Parker Meridien has it all, you realize that, where most restaurants have a bar with singles spilling out of the seams, you've installed a Burger Joint (where celebrities are spotted with relative frequency)É Has that cost you the hip crowd?

First, there is a bar and entertainment in Seppi's. [The Burger Joint] has exceeded our expectations. We are doing, on average, 500 people a day. A lot of locals, more than hotel guests. Prices are reasonable. $5 for a great burger in midtown Manhattan! It's touched a nerve. It is what people are looking for. The hotel is very designed. The other thing people want is relief from that design, something simple, homespun and good.

[iSophia note: Try getting your burger before noon or after 1:45 p.m., to avoid standing in a long line.]

New Yorkers get a bad rap in the suburbs for being rude, but your unique approach to the elevator experience creates one of the friendliest environments I've ever experienced in the claustrophobic, "where do you put your eyes" liftÉ Strangers giggle together over vintage Charlie Chaplin, Tom and Jerry and Bullwinkle shorts. What a welcome relief from the nonstop news (always bad) and all of the advertisements found in so many elevators these days. Whose idea?

You're standing there in this moving box. Everyone is always so uptight. This is a way to break the ice. People start talking to each other and laughing. The big challenge was getting something short. Originally, we wanted them to be silent. People wanted the sound. We turn the sound off early in the morning, and then we turn it on after 11:00 a.m. I feel very strongly about not trying to sell people things when they are in the hotel. A lot of hotels put posters to sell their sirloin steak. You're here! It's time to take care of you, not to sell you.

In fact, your no ad policy creates a feel of in-crowd exclusivity. If you don't know about the Burger Joint, you'll probably never find it! There are virtually no ads for it, and the only sign is a neon burger behind the concierge's deskÉ Speaking of which, we might want to clue guests into what Fuhgettaboudit meansÉ

The first privacy notice was "Go Away." We all thought it was very funny, but the housekeeping staff felt offended by it. One of my colleagues here, we were brainstorming, and he came up with fuhgettaboudit. People take those signs. I was in a high-level government office in Washington D.C., and I saw one sitting on the desk.

How do you encourage such creativity in your staff? How do you foster an attitude of uptown, but not uptight, friendly but not chatty?

The Norma's menu is an incredibly collaborative effort. Line cooks, sous chefs, chefs are all involved. One of the new dishes comes from one of the cooks. He made a big plate of Nachos, which will be on the next room service menu. It's a team effort. About 4-5 of us sit in a room, and we come up with outrageous names. We have the Zillion Dollar Frittata. Dr. Schmatkin's Mandarin French Toast. It's not one person sitting in a room. We're liberal with praise and critique. Nobody takes it personally. The Go Away thing is a good example. The housekeepers said, "It's rude." We didn't see it that way, but we don't want to offend anybody, so we changed it.

Let's talk about style and function. Guests are going to LOVE the Free amenities that your hotel offers. But I want to point out that free doesn't mean that you skimp on quality. Of four of the top hotels in town that I've tried this year, your DSL service was the most reliable, even over a 5-star national monument (hotel) that charges $24.95 per day for high-speed Internet connection. You've got the best gym with dance and yoga classes, top-notch trainers, wonderful massage therapists, and Parker Meridien is one of the few hotels in NYC that has a pool.

Here's what differentiates us. The hotel was developed, built and owned by Jack Parker, and has been since 1978 when he started developing. It's not for sell, and it's not going to be for sale. We're not trying to squeeze every penny out of the hotel. We foster relationships with guests and the companies we work with. We could make a few extra bucks here and there. When the market goes down, people remember what you did on the up. Our motto is, "Let's treat people fairly, and they'll repay us." These last few years, when we were on the down, we did significantly better than our competitors. That has to do with the long-term vantage that we take.

Do you cater to conventions? Are there video-conferencing facilities?

We have video-conferencing capabilities. We have a boardroom set up with video conferencing and 16 seats, with capability for more. We have 9000 feet for corporations and for, social events, like weddings, birthdays, bar mitzvahs.

You've made some very bold, creative decisions that have launched the Parker Meridien and the Parker Meridien restaurants (like Norma's) to the top of the industry. What are your personal success secrets? Just how did you get so capricious? You've stressed time and again that your expectations have been exceeded, and that some of the ideas just didn't workÉ

I think that in this business, probably in most businesses, to be successful you need to be passionate about it. You need to love it. It needs to be quite consuming. For me, there are two elements, which are my family and my work. In our business, it's hard to have a balance. I'd be curious how many General Managers are on their first marriage. I'm married 27 years. It's very unusual. To have that balance between personal and work and to have energy and passion are the keys to being happy and successful. You can't do this job and shut it off when you go home at night. I'm always thinking when I go out, "That was a great idea, how can I incorporate it?" You're always trying to be innovative. People oftentimes tell me that I'm lucky because I like what I do. If you're passionate about what you do, if you're into what you do, you can't shut it off. In the end, you have to be yourself. The minute you're forcing it, you're not going to be successful. You have to like the people you work with, or it's not worth doing.

Best of L.A., FUN, FROLIC and FREE TIME in Sunny So Cal..

This summer, while investors think about more important things than the rise and fall of the NYSE and NASDAQ (like their tan lines), our editors have put together the best things for FUN, FROLIC and FREE TIME in Los Angeles. We encourage all over-worked Americans, who have posted extraordinary productivity gains in the last few hard years, to enjoy a grand, well-earned vacation! And if your travels bring you to sunny southern California, treat yourself to only the best, courtesy of our editors and friends, an eclectic, elite, down-home bunchÉ

Best Restaurant: Josie's Restaurant, Santa Monica, CA. Fresh, organic, inspired, unusual and simply an orgasm for your taste buds. Star chef, Josie Le Balch, known for Remi and the Beach House, and her Chef de Cuisine, Jill Davie, create seasonal menus, using local produce and the finest ingredients available. Co-owner Frank Delzio employs his Napa Valley connections to stock the cellar. Don't skip Pastry Chef Jonna J. Jensen's dessert. Every calorie is worth it! www.JosieRestaurant.com 2424 Pico Boulevard, Santa Monica, Ca. 90405 (310) 581.9888

Best Cheap Restaurant: Sunnin, Westwood, CA. Owner and matriarch, Toni, serves up home-style Mid-Eastern food with daily specials that include wonderful staples like baba ganoush, hummus, eggplant, lamb and okra. Fresh-made daily. First come, first serve. Cheap and delicious. 310.477.2358. 1779 Westwood Blvd., just north of Santa Monica Blvd., in Westwood.

Best Breakfast: Il Dolce Café, Santa Monica, CA. With a quaint garden rear patio on one of the most chic streets in So Cal, Il Dolce is rife with entertainment industry heavyweights and sometimes, a few stars. Why? Sure it's local, low-key and reasonably priced, but where else can you get your latte hand-pressed in a vintage 1967 Gaggia cappuccino maker? If breakfast is all about espresso and scones, then Il Dolce Café is paradise. Starbucks, Coffee Bean, none of these come close to Il Dolce's strong, savory coffee drinks. If you see Marg Helgenberger there in her workout clothes, hiding behind shades, be a local and pretend not to notice. 310.458.4880. 1023B Montana Avenue. Santa Monica, CA. Email: IlDolceCafe@hotmail.com

Best Cheap Breakfast: Gilbert's El Indio, Santa Monica, CA. Cheap and cheesy with a friendly family staff. Share newspapers with your neighbor. Get the latest sports updates and movie reviews from Luna and Mario. The most food you'll ever get for under $6.00. Great salsa and guacamole. Don't bother if you're not into juevos, frijoles and hash browns. Bring your own Starbucks if you require good coffee. 2526 Pico Blvd, Santa Monica, CA 90405-1829. Phone: (310) 450-8057 

Best Tourist Restaurant: It's rare when anyone or anything can boast of having it all. Few of us can hope to have one evening that remotely shadows a Jennifer Aniston/Brad Pitt date. Beauty is fleeting. Stardom elusive. Who knows how the Lobster manages to get everything right: a fantastic view right on the ocean, great food, reasonably priced parking, friendly wait staff and all at standard gourmet prices? Book ahead. The Lobster, 1602 Ocean Avenue, Santa Monica, CA 90401. Phone: (310) 458-9294

Best Dim Sum: Empress Pavilion, Chinatown, Los Angeles, CA. An endless selection of traditional Chinese favorites (like chicken's feet and congee) alongside more American friendly pork buns, shrimp dumplings and shiu mai. Try the Chinese tamales, which are filled with sticky rice, chestnuts, fried meat morsels and savory flavors. For dessert, don't pass up the sesame rolls with red bean filling, the mango pudding and/or the custard tarts. Your kids (or the kid in you) will thank you. 988 N. Hill, Los Angeles, CA. 213.617.9898

Best Sushi: Asanebo, Studio City, CA. Nobu, step aside! Specializing in sashimi, small portions and delectable seasonings that hang on your taste buds long after the bite, Asanebo is the only choice for the most memorable Japanese experience you'll have on this side of the Pacific Rim. Redefines the word expensive. A once in a lifetime experience for those who count pennies. A Ôseal the deal' sure shot for businesspersons looking to court their clients or mates looking to impress their dates. 818.760.3348. 11941 Ventura Blvd., Studio City, CA.

Best Experience: Sunrise biking and rollerblading at Venice Beach. If you wait too late (after 10:00 a.m.), the Venice Beach boardwalk blade and bike path is worse than the Los Angeles freeways, nearly a parking lot, frustrating and dangerous if you're unsteady on your wheels. Go early (5:30 or earlier will catch the sunrise, 8:00 is when the locals are just waking up) and the colorful, eccentric sights and sounds of the boardwalk are all yours. It's worth the wait to hit Fig Tree's Café for their cornmeal or oatmeal pancakes, which allows you a front seat view of the vendors setting up their cheap artwork and sage smudge sticks, while the blue skies and waves glisten on the horizon. Renting blades and bikes starts at $10-$12 per person per hour, with lots of options, from roller blades to fun cycles to Beach cruisers. Rent the night before if you're going for the 5:30 a.m. sunset ride. Where Rose Avenue meets the beach in Venice, California. Click here for a map.

Best Palace: The Getty Center: You don't need a reservation and admission is free. Just drive your car up to Brentwood, pay $5.00 and treat yourself like a royal tooling around the exquisite gardens, viewing one of the most impressive photography collections in the world and gaping at original Van Gogh, Monet and Holbein. Everything from the architecture, to the view, to the food (yes! Even the food) is memorable. www.getty.edu. On Sepulveda Blvd., off the 405 freeway, north of the 10 freeway, in Brentwood, California.

Sexiest Business Suit: Frankie B: West Coast designer, Daniella Clark, best known for making trashy cool with her ultra low hip huggers and sheer cotton t-shirts, has taken tasteful sexy to its breaking point with her new skin-tight, hip hugger pant and skirt suits. Pamela Anderson nearly fell out of her Laker skybox when she saw first saw it! Strictly for models, anorexics, Lara Flynn Boyle, and those, like plumbers, who are daring enough to ride their pants below the crack. For showroom locations and phone numbers please call: 213.624.5411 or check out the collection on line at www.frankieb.com. (For our male readers, Victoria's Secret has nothing on the Frankie B models and clothing.)

Best Makeover: Lori Hart, Marina del Rey, CA: Specializing in non-surgical face-lifts (that don't hurt or cut!), skin care and makeup, Lori Hart can make you look years younger after just one electro-stimulating treatment. The series is designed to shave up to 15 years off your jowls, wrinkles and frown lines without making your face look tight or unnatural, at a fraction of the cost. Lori's studio is a throwback to old Hollywood, with Sinatra piped in, feathers, boas and pampering galore. Anti-aging never felt so luxurious! 310.574.3990. www.lorihart.com

Best Yoga Class: Golden Bridge Yoga, Los Angeles, CA: Yoga is still all the rage in Los Angeles, with literally thousands of new instructors (i.e. Burned out career people) claiming to understand inner peace. Golden Bridge Yoga is a spiritual-based yoga center that is run by practicing Sikhs who attend Sadna at 4:10 a.m. every morning, when many yoga instructors are still sleeping off their martinis. After yoga, you may be served a vegetarian meal just because "sharing food is sacred." Gurmukh Kaur Khalsa, 60, the co-founder and director, is famous for being the yogi to the stars, specializing in pre and post-natal care. The real deal in yoga and spirituality, from the music, to the setting, to the wrapped heads, to the practice itself. 5901 3^rd Street, 1^st Floor, Los Angeles, CA 90036 323.936.4172.

100% Financing? You May Be Closer to Purchasing Your First Home Than You Think.

By Kassie Welch, Mortgage Loan Consultant, 310-666-4020 or KassieWelch@aol.com

For many people, buying their first home is a daunting task, especially saving for the down payment. Well, that's no longer the case. Gone are the days of saving 10, 15 or even 20% before enjoying the benefits of home ownership. With the advent of 100% loan programs, many more people are able to leverage their credit and income to buy a home now.

100% financing programs are available for purchase, refinance and debt consolidation on Single Family Residences (SFRs), Planned Urban Development (PUDs), Duplexes and Condos. Below is a list showing the flexibility of 100% financing.

100% Financing Program Highlights*:

• No down payment required
• Available for first-time homebuyers
• Loan amounts up to $875,000
• Credit scores as low as 600
• Interest only mortgage payments available
• No verification of rent or mortgage payment required
• No cash reserves required
• No mortgage insurance required
• Up to 55% debt-to-income ratios allowed
• Seller may pay up to 6% of non-recurring closing costs
• Limited income and no income verification loans available
• One day out of bankruptcy is okay; no seasoning required
• Three lines of traditional credit required, with two-year credit history

* Some closing costs may be required

[Ed's note: Can you say liberal monetary policy three times fast before interest rates start a-rising and your adjustable interest rate mortgage payment balloons bigger than you've budgeted for?]

One of my favorite 100% financing success stories is Patricia Rodriguez (name changed to protect her privacy). Patricia, a young nurse one year out of school making about $60,000 a year, was able to purchase/finance a $270,000 home. When she made her offer she wrote a check for $3,000, all the money she had at the time, as a Good Faith Deposit on the house. Her Real Estate Agent then negotiated with the sellers to credit Patricia $6,000 to cover her closing costs, which many 100% lenders allow. At the time of closing, Patricia actually received a check for almost $1200, buying her first home with just over $1800 out of pocket cash.

As you can see by the above example, there are many advantages of 100% financing. The first and most obvious is becoming a homeowner much sooner, instead of waiting to save for a down payment. This means that you begin to immediately build equity and earn appreciation, or rise in property value, increasing your net financial worth versus lining the pockets of your landlord.

[Ed's note: Real estate, like all investments, waxes and wanes in value. Buying today doesn't ensure that your property will increase in value tomorrow. In fact, in the event of a major disaster, natural or man-made, your property value will decline significantly overnight. Having said that, real estate has certainly had a great run-up, in general, for the past few years, as a result of record low interest rates and the fall of the stock markets. You may, in fact, be buying high, if you purchase real estate right now. Unfortunately, no one has a crystal ball about whether property values will continue to rise, but most economists agree that interest rates and inflation are sure to be headlines in 2005 and 2006. Any homebuyer who hasn't budgeted for higher mortgage payments and property taxes may be in trouble in the very near future.]

Below is an example showing the upfront savings with 100% financing compared to a low, 5% down payment, which is significant. The 95% loan-to-value program requires a total of $20,925 to close whereas some 100% lenders require no additional cash to close and "A Paper" (two years employment, full documentation, and excellent credit) 100% financing programs only require two months reserves.

Zero Down Versus 5% Down
$300,000 Purchase Price

* Based on a minimum two months reserves. Please note: impounded taxes may be higher depending on when taxes are due and what month the loan closes.

Another example of a 100% financing success story is the Donaldsons (name changed to protect their privacy), a couple who approached me after one of my monthly First Time Home Buyer Seminars. Although they had excellent credit and made over $100,000 combined income a year, they didn't have any savings except for retirement accounts. Instead of paying a penalty to access their retirement funds, they raised the number of dependents on their W-4s to net out more money from their paychecks*. Six months later, the Donaldson's had enough money to make a Good Faith Deposit on the purchase of their $500,000 home. Because of their good credit and employment history, I was able to get them "A Paper" 100% financing with the Donaldson's paying just over $6,000 out of pocket expenses.

*Please check with your professional tax preparer before making changes to your W-4s.

Another, less obvious benefit of 100% financing is taking advantage of the maximum interest payment deduction on your income tax returns. Even when buyers have a down payment, some choose to finance 100% of their purchase because they want the maximum tax write-off and to have access to their money for other investments and uses, instead of having their funds tied up in their home. Also, many 100% lenders do not require Mortgage Insurance (MI), which compensates lenders for making higher risk (greater than 80% loan-to-value) loans, but is not tax deductible. With 80/20 "Piggy Back" loans, the risk is built into the interest rate, which is a tax write-off. Below is a payment comparison showing the net tax savings of 100% financing versus 95% financing with Mortgage Insurance.

Payment Comparison
Purchase Price: $300,000

* This is an example of a 2/28, which is a two year fixed rate mortgage, which then becomes adjustable for the remaining 28 years. A 30 due in 15 loan is amortized over 30 years with the remaining balance due in 15 as a balloon payment. These loan programs have liberal underwriting guidelines, including alternative income documentation, making it available to just about anyone with credit scores over 600. Both loans have two-year pre-payment penalty, which also happens to be the required time to hold a piece of property without capital gain implications. After two years, many borrowers either refinance or sell their starter home rolling their equity into their next home.

** The second example of "A Paper"100% financing. It is an 80/20 loan with a five-year fixed first and a HELOC (Home Equity Line of Credit) second. The first loan has fixed interest rate/payments for five years and then becomes adjustable. This is perfect since most first time homebuyers usually sell 5.5 years after purchase. The HELOC loan is an adjustable rate mortgage that's generally tied to prime plus a "margin" depending on your credit score. It is a popular choice because often times the interest rate is lower and the loan acts like a credit card that you can pay down and borrow against for a set period of time.

*** Based on 25% Tax Bracket (2004 Tax Rate Schedule - Single Person earning between $29,050 - $70,350). Please check with your professional tax preparer to determine your specific tax benefits of home ownership.

Many 100% lenders also offer Interest Only loans, which can further reduce payments. This allows for the second loan, which generally has a higher interest rate, to be paid off faster and before you pay down your first loan, just like you'd pay off a higher interest rate credit card first. In addition, lower payments help buyers qualify for higher loan amounts so they can purchase more home now. Below is an example of lower monthly payments and savings available with Interest Only (I/O) loans.

In addition to zero down, many buyers are taking advantage of the 103% and 107% programs. These programs are designed to finance closing costs and the 107% program pays up to 4% of consumer debt as well. Both programs allow buyers to not only purchase sooner, but with the 107% loan a buyer may be virtually consumer debt free at the close of escrow. This program transforms consumer debt into tax-deductible interest and sometimes leads to qualifying for higher loan amounts.

The 107% program made all the difference for one young couple, the Espinozas (again, the name is changed to protect their privacy). With 103% financing, the couple only qualified for a $500,000 loan because they were still paying off student loans. The problem began when they found the home of their dreams, which happened to cost $517,000. With some quick calculations, I discovered that by paying off their student loans and wrapping them into their mortgage, they qualified for the higher loan amount. The Espinozas were ecstatic. They were thrilled to buy the home they really wanted, and to pay off their student loans and have the interest be a tax write-off.

Some people are concerned that 100% financing may mean higher interest rates. Many people believe the benefits of the tax write-off and [chance for] appreciation of home ownership far outweigh the cost. You could wait and save for a down payment, or you could be benefiting from a significant tax write-off and [potentially] earning appreciation instead of making your landlord rich.

To attend a First Time Home Buyer Seminar in the Los Angeles area or for more information, please contact Kassie Welch at 310-666-4020 or at KassieWelch@aol.com. Kassie is a seventeen-year veteran of the real estate finance industry, with extensive experience in all areas of financial services, from processing to underwriting. In addition to a degree in Business Administration, she holds certifications in appraisal, underwriting and fraud detection/prevention from the Mortgage Bankers Association.

[Ed's note: Please note that while real estate has been a top-performing asset the last few years, real estate is as risky as any other investment, and there is no guarantee that your purchase will be worth more next year than it is this year. In fact, especially if you are paying interest only, if property values fall, you may be locked into your loan until property values return, which could take years. In that scenario, you will be locked into a variable rate loan that could be linked to rising interest rates, meaning your monthly payment could increase significantly, and you'll have no way to get out without making more money or foreclosing. Additionally, rising interest rates are on the horizon. Factor that into your decision-making.]

Rising Interest Rates:

Read what the experts, including Chairman Alan Greenspan, are predictingÉ

"The federal funds rate must rise at some point to prevent pressures on price inflation from eventually emerging. As yet, the protracted period of monetary accommodation has not fostered an environment in which broad-based inflation pressures appear to be building. But the Federal Reserve recognizes that sustained prosperity requires the maintenance of price stability and will act, as necessary, to ensure that outcome." Alan Greenspan, Chairman of the Federal Reserve Board, speaking before the Before the Joint Economic Committee, U.S. Senate, on 4.21.2004

"To think that Fed funds can't be 2% in three monthsÉ It should be at least that. Whether or not it can be 3 or 4, if the stock market can handle higher rates, the Feds will bring it up." Keith Anderson, Managing Director, Black Rock Financial, one of the biggest bond managers in the country. 5.13.2004, speaking on Kudlow & Cramer.

"The economy is off to a strong start in 2004, and prospects for sustaining the expansion in the period ahead are good. É However, the unified deficit swelled to $375 billion in fiscal 2003 and appears to be continuing to widen." Alan Greenspan, Chairman of the Federal Reserve Board, speaking to the Committee on the Budget, U.S. House of Representatives on 2.25.2004

"In 2005 we're going to have a serious problem with inflation and rising interest rates. I'm not worried about it in 2004, but I'm critically worried about it in 2005 and 2006." David Littman, chief economist, Comerica Bank, speaking on Kudlow and Cramer, 12.30.03

Money Makeover:

From Desperate & Bankrupt to Confident and Cash-Flow Positive!

By Dr. Audrey Reed, author of Money Tool Box For Women – Simple Solutions for Mastering Your Money

Jessica and William were advised to Declare Bankruptcy, but with a few key pointers from NataliePace.com contributing writer, Dr. Audrey Reed, they skipped off the path of debt, and into financial freedom.

pring is the time to clean up messes. Last year, I was invited to Dallas to do a Money Makeover for a couple and their three children. Their hard work and diligence changed the alchemical makeup of the entire family's relationship to money, and abundance is now possible.

In October of 2003, Fox 4 Television called and requested that I come to Dallas for their two part series, Money Makeovers. The producers had been having a difficult time finding their qualifying couple. Jessica Nixon was serendipitously walking down the hall from an interview for her graphic arts business, when she overheard the producer talking about needing a participant for the program in just two days.

Jessica and William are typical of the thinking that happens when families get into financial trouble, either through naïve business practices or spending unwisely. This mindset has created an epidemic in our nation. The cure takes time. Bankruptcy puts others in jeopardy of being victim to your overspending. Be honorable in your behavior and in your actions. The damage you cause may not be just to your own credit rating. It severely impacts the businesses and lives of others.

The producer had found the perfect challenge just twelve hours before I boarded the plane for Dallas. The circumstances seemed insurmountable.

• $30,000 in credit card debt
• three children in private school
• mounting monthly debt factor each month
• slowing entrepreneurial business

Bankruptcy had been recommended for the family, but for Jessica, and her husband William, that was not an acceptable answer. Nor was taking their children out of private school, which could have been a $2000.00 a month easy solution. Their expenditures were minimal except for private school and the travel to and from private religious school, but they would rather give up the farm than put the children in public school. Jessica and William Nixon see education as the children's future. There wasn't much else to give up in their lifestyle--maybe $75 a month cable television!

Sacred not Secret
Willing to do whatever it took, Jessica met me at the studio the next morning. She was beautiful and shy. She did not want to expose her family's financial situation, seeing it as secret and personal. Jessica and William wanted effective guidance that would lead them out of debt. Their loyal family CPA recommended that they declare bankruptcy and family members, who could not listen to the entire story, merely offered their assurances that everything would work out, not to worry.

How did they get to this point? Neither Jessica nor William is the typical credit card abuser. Most of their debt came from two clients who did not pay Jessica for graphic artwork and printing work. She had fallen prey to their cash flow issues and was receiving only $400.00 per month, which had her paying the interest on a major portion of the debt load. William is a Hunter Guide and Farmer. They had entrepreneurially supported their family for the past ten years.

Below is an excerpt from our interviewÉ

Dr Audrey- When did you begin to believe you were in financial difficulties?

William -A couple of months after the clients should have been paying the money back to us. These clients kept telling us they were going to pay. They didn't know we were in trouble. We felt victimized. It stopped us in our tracks.

Did you know what was going on all the time in Jessica's business?

Jessica--Only when I realized we were in trouble. Before that, I didn't want to worry William.

When it started to be more money out than in a month - then what?

William--We were in serious trouble, and didn't know what to do about it. We didn't seek other advice. We were embarrassed. We lost our ability to see all that we had and could use to get ourselves out of this mess. It was like we had gained lots of weight and couldn't get our faces out of the refrigerator.

Jessica and William were not into their wealthy thinking. Jessica was carrying client debt factor as her burden. They had become consumed with, "How are we going to play the bills?" rather than "What are the assets we have that can assist us with our financial debt?"

Rich Thinking
Assets

1. Farm and Farm House--250 acres (Free and Clear)
2. Farm Equipment
3. Cars
4. Lease Land for Hunter Guide Business (William)

The Assignments:

1. The first change we made was to set Jessica's business up so that she accepted credit cards. All client billing and costs where put on the client credit card.
2. Second assignment - How could the assets that they had and were not using be used?
   • Loan from bank for acreage not including house property.
   • One more hunter guide using the leaseable land to cover entire tax cost.
   • Lease out part of their farm land for grazing
   • Find out how to use billboard on their hunting property.

Jessica talked about how I changed her attitude toward rich thinking! "The lesson was to use credit cards in the business, so that the bill goes directly to the client, so we couldn't be put in this position again. Thinking we should have known, stopped us, then you showed up in our life. We were not necessarily good business people, [although] we do have good businesses."

We thought the bank would loan the money on the land, but they wouldn't. A small set back! We went back again. They would loan the money on the tractor. That was fabulous! A bank with a conscious. The loan manager didn't want them to loose any land, if they could pay back the loan.

• The bank (they still had good credit and a good banking relationship) loaned them $30,000 on a three-year loan (at a good rate) to pay off all credit card debt. This reduced their monthly payments by $300.00.
• William enrolled one more hunter guide to lease time on the hunting reserve. That covered the tax bill for the year.
• William found a local cattle rancher who needed alternative grazing land and leased a portion for the next year.
• They are still working on the billboard aspect. Since it had not been used in so many years, there is red tape with the TXDOT.

William: "We would have never thought of these small but fruitful alternatives to bringing in more streams of income. We were thinking acting and thinking poor. Your assistance has changed our thinking. It expanded the way I was talking to people about money. This entire ordeal has made me focused and aware. Now I am speaking to a group of hunting clients about funding for another project. This would not have even crossed my mind before--to partner with investors. Rich thinking - we aren't thinking in a rabbit hole anymore."

Dr Audrey--What was the most difficult new behavior to master?

Jessica - Save money whenever you don't feel like there is any money to save.

William -Writing down where I spend money. I thought it took the control out of my hands. Jessica would know how much money I was spending and on what. I don't know why that made me uncomfortable. Now I appreciate the practice. It made me aware of how much money I am spending, and how much money it takes to operate the family and our businesses.

How are you feeling about it now?

William--I still get nervous when things get a little slow, but I see how it can work out.

Jessica - William gets nervous. When you are self-employed, it is difficult and causes concern. All the bills are paid and we are putting money back. William and I are talking about everything now. The children and involved, as well, in our financial discussions.

On your recommendation, we were strengthening our relationship with the Bank.

William's assignment was to obtain a land loan from the bank to eliminate the high credit card interest rates. The bank would only give us a loan on the tractor, so we jumped on it. We saved $300.00 a month on interest alone, and the loan will be paid off in three years, instead of paying interest on our interest with the credit card payments. We have realized that being concerned is okay, it heightens our awareness. It keeps us focused, as long as we are looking for solutions. Bankruptcy is no longer in our thoughts. I am actually opening bills and writing checks on time. I had gotten to the point that I was letting the bills pile up.

What about the children? How have they changed?

Jessica and William -That's the bestÉ.They have taken to this new thinking and our discussions in such a magical way. They are totally into being a part of this.

Hearing them talk about money and this year's Christmas list was very sensitive, about what they really wanted and if there was enough left over, then maybeÉ.

Jessica--Our oldest daughter Natalie is managing her new checking account, and doing very well with your simple solutions. She is budgeting her gasoline allowance and making decisions about activities to stay within her budget. She's making relations with the bank.

Amanda and Joe, our two other children have their own savings accounts and have a goal of depositing money each month. We do not let them do automatic deposits. Each month they go into the bank and deposit the money into their savings accounts. Making relationships! They are both thinking of ways to earn money. Joe, the youngest at nine years old, asked for 101 Ways for a Kid to Make MoneyÉHe has a plan that mirrors our whole theme.

Joe is working on the percentages I recommended:

• 10% to pay himself with out of his allowance
• % savings
• % church
• % to spend
• % educational fund

The kids are more aware of spending habits and don't push for drive-through dining and meaningless purchases. They have begun to think things through, to make decisions on how they really want to spend family money, and they want to participate.

The experiment and the experience changed Jessica and William's lives. They had read a lot of books before these money issues crashed down on them. When they were actually in it, they couldn't see the forest for the trees. Now, they have a clarity and intention that guides their behaviors, and they are grateful.

Dr Audrey Reed is the Founder of Works in Progress, Inc. She uses her 30 years of business experience, her spiritual guidance (Doctor of Spiritual Science) and educational savvy, along with an uncanny intuition, to guide her clients to thinking outside of the box, while staying focused on the ultimate goal. Unblocking the pathways to wealth and riches, brings clarity to businesses and individuals searching for new abundant territory.

www.draudreyreed.com

Money Tool Box For Women - Simple Solutions for Mastering Your Money is now available as an e-book. Go to www.draudreyreed.com to order for only $6.95 per copy.

Also check out Verbal Magik - Ten Simple Practices to Increase Sales www.verbalmagik.com

NEED A MONEY MAKER-OVER? Dr. Audrey Reed will be in the NataliePace.com chat room on Wednesday, June 16, 2004 at 8:45 a.m. PST. MARK YOUR CALENDARS!

Is Inflation Mild or Underestimated?

Will Interest Rates Rise Before the Election?

By Byron B. Snider, CFA, President, Live Oak Capital, LLC

oday's low interest rate environment is based on the view that inflation is mild. It was just a few months ago that there was a "deflation" debate. However, economists ought to get out more often. They should go shopping sometime. The reported Consumer Price Index (CPI) increase of 1.9 percent for 2003 seems at odds with the price appreciation we are witnessing in many areas.

Interest rates float on top of the expected inflation rate, so any change in Wall Street's perception of inflation would have direct bearing on bond prices. Investors are counting on their bonds to represent the safe portion of their portfolios. If economists are underestimating inflation, even by a relatively small amount, investors may be at risk of suffering a future price decline of their bond holdings.

The CPI is a widely followed measure of inflation reported by the U.S. Department of Labor as part of its Bureau of Labor Statistics. Prices are collected in 87 urban areas across the country from roughly 50,000 households and 23,000 retail businesses. The index compares current prices for a basket of goods and services to prices during the base period of 1982-'84. Prices are weighted according to a typical household's spending behavior, as follows:

Source: U.S. Department of Labor Bureau of Labor Statistics. Updated through December 2003, with weights rounded to first decimal position.

These price changes appear mild, but it is difficult to reconcile these government figures with other reports of price increases. For example, the following price changes were reflected in a recent Wall Street Journal table of consumer purchases:

Sources noted in the Wall Street Journal column, January 2, 2004, page R11: National Association of Realtors, The Economist Big Mac Index, Lundberg Survey, Medical Mutual of Ohio, AMC Entertainment.

It is dangerous for bond investors to underestimate inflation. Rising interest rates cause bond prices to decline, with longer maturities taking the worst hit. This interest rate risk is separate from the credit quality of the bond. For example, here are the current rates and potential price declines for U.S. Treasury obligations of varying maturities:

Sources: Baseline and Bloomberg.

Inflation has been the economic boogeyman since 1980, when the figure spiked to nearly fifteen percent and the Federal Reserve declared inflation monetary enemy number one. Over the years, policies directed toward containing inflation have generally been successful. However, inflation is a tough opponent. We are currently seeing high oil prices, a falling U.S. dollar on foreign exchange, large federal and state budget deficits, and the early stages of rising labor costs that are usually associated with accelerating economic activity. These are just some of the factors piquing my skepticism. It is often too late to protect against interest rate risk once the Federal Reserve identifies the threat and takes action. Investors looking for safety in their portfolios may want to shorten the average maturity of their bond holdings.

Byron B. Snider, CFA
Live Oak Capital, LLC
2535 Townsgate Road, Suite 310
Westlake Village, CA 91361
Ph:       805-230-8282
Fax:      805-230-8283
Byron@Live-Oak-Capital.com

Want to discuss rising interest rates with a pro? Wonder how it will affect bonds? What should you do if you have a variable rate real estate loan? Join Bryon Snider in the NataliePace.com Chat Room on Wednesday, June 23^rd for a Closing Bell Chat at 1:00 p.m. PST.

Win a Free Trip to Barcelona, Spain and Make the World a Better Place at the Same Time!

Marilyn Tam, the founder of the US Foundation, will be giving the keynote address for the forum on business at
the Barcelona Forum 2004, featuring business leaders like Bill Gates and Carly Fiorina and rock stars like Sting. What is The Role of Corporations in the 21st Century?

By Contributing writer, Marilyn Tam, the founder of the US Foundation

Barcelona 2004

he Barcelona Forum 2004 is an unprecedented gathering of people from all societies to spontaneously and freely participate in creating a better planet based on the principles of cultural diversity, economic sustainability, and world peace. Recognizing this important juncture in history, the United Nations, the Spanish government, the Catalan government, and the city of Barcelona, Spain dedicated themselves to the building of an international village to host a celebration of ideas, dialogue, and diversity.

The first world event will be held in Barcelona May 9^th through September 26^th, 2004 with an expected attendance of five million people. The Forum features forty-five Dialogues and hundreds of entertainment and cultural events. Through worldwide television broadcasts, web casts, and ongoing interactive web sites, at least 500 million people will participate in this progressive exchange, as it offers a powerful ongoing means of global cross-cultural communication and action. For more information, go to www.barcelona2004us.org.

We, the North American marketing and promotions arm, are sponsoring an essay contest on the themes of the Universal Forum of Cultures Barcelona 2004: cultural diversity, sustainable development and conditions for peace. High school, college and graduate students are invited to participate. The top 3 winners get a trip to the Forum for a week and the top 100 essays will be published in a book and on the websites. The essay deadline is June 15, 2004. ACT NOW!! The essay contest website is http://www.barcelona2004us.org/essay.html

The Forum that most attracted me was the one entitled the Role of the Corporation in the 21^st Century. This is where I can add the most value. I have experience in global business, having worked with 120 countries and having first hand knowledge of the impact businesses have on the lives and environment of so many places.

I was thrilled when the Forum asked me to be the opening keynote to this conference. I was flattered since the list of speakers are outstanding, including Carly Fiorina, Chairman and CEO of Hewitt Packard, Tim Love, co-chair of Saatchi & Saatchi, the largest advertising and marketing agency in the world, the former US Secretary of State, Madeline Albright and yes, even Bill Gates!

I imagined that they may have wanted me to speak because of my background and my path to becoming a corporate leader. Maybe my perspective coming from unlikely circumstances gave me a different view and insight into the corporation's role and impact in the world--the good, the bad and the ugly.

When I was a young girl of 8 or 9 growing up in Hong Kong, I would spend the summers with my aunt and uncle in the fishing village of Tai Po. There I would play with the village children, and the fisher kids learning and doing what they did. We would walk and play alongside the river, which had water the color of the fabrics that were being dyed that day by the factories that lined the banks. The river would be yellow or blue or red, depending on the color of the fabrics being dyed, because the excess dye and used dying bath was just emptied into the gutters, which ran into the river.

We walked along to the back alleys where the hand embroidered needlepoint handbags were made. We would take pieces of beautiful fabrics home to embroider the needlepoint background; the simple handwork was just US 75cents per piece. Or we would go to the further back alleys where the plastic flowers factories were and get bags of plastic leaves, stems and petals to assemble at home and then bring back, charging just one US dollar for one hundred stems.

Sometimes I would go down to the banks of the ocean bay and play with the fishermen children. I would wade in the mud with them, digging for clams, which they sold in the open air market on the other side of the river. We would split newspapers and the long reeds that grew by the banks of the bay to use as wrapping and string. We ate off the street stalls, earned money doing this various piecework and played on the street. The air was warm, the days long and sunny and I thought life was wonderful.

Nobody talked about child labor, unfair wages or environmental degradation, and looking back at it now, all that was definitely going on.

I didn't realize the meaning of poverty and injustice until I returned to school in the city when I was 11. There I found out that one of my school mate's whole family lived in a room of 200 square feet and shared a bathroom and kitchen with two other families in a government subsidized apartment building. Now that to me was sad and unfair. Here was a girl just like me, doing her best to learn in school and having to struggle with having a place to do her homework or to get enough food to eat. It didn't seem fair that by the accident of birth she was given this difficult lot to deal with.

I resolved to make a difference for people with so much less than what I had. Sure I had my challenges, growing up in a traditional Chinese family as the second girl to be followed quickly by the birth of three brothers. I was neglected and abused, but I had enough to eat and space to study. I resolved that I would grow up to make a positive difference in the world.

With that as my mission, I left home in my mid-teens and went to America by myself to go to University. I made my way through graduate school and to achieve leadership in several Fortune 500 companies. As I rose to become a VP of Apparel and Accessories at Nike, as President of Reebok Apparel Products and Retail Group and CEO of Aveda, I never forgot my schoolmate and my mission to make a difference in lives like hers.

So, as I worked in the corporate world, doing business with 120 countries around the world, I always remembered my youthful experiences. Working with the factories first in Hong Kong, Taiwan, Korea, Greece, Turkey and gradually as the economy of those countries grew stronger and more expensive to produce goods, we moved production further into less developed nations, first India, then Pakistan, Bangladesh, Indonesia, Vietnam, Mauritius, Eastern Europe, Africa, Mexico and South America. In each case, we established labor standards for the factories we worked with. We demanded proper working conditions, enough ventilation, lighting, breaks, living wage, and a minimum age requirement for the workers. We also set standards for the materials and dyestuffs used in the manufacturing and packaging process.

We also worked with our competitors to try to establish industry wide standards for garment manufacturing. It was a slow and often difficult process; cooperation between competitors in the same field is regarded with suspicion. By the mid 80's and early 90's, the US and European consumers were growing in awareness of the deplorable conditions that many of the goods they consumed were made under. Child labor, prison labor, slave labor, appalling working conditions, low wages, and with the goods often produced under circumstances that had a devastating effect on the environment. It was a time that was ripe for global cooperation on raising the working conditions and environmental protection.

At the same time, the cultures of the production countries were being westernized and rapidly impacted by the radical changes brought about by the influx of capital and build- up of factories and development of former rural areas into urban landscapes. These changes were rapid and oftentimes done without a long-term plan and consideration of the effects on the local cultures. Cultural norms were oftentimes ignored by the western buyers who brought in, with their financial capital, their taste and attitudes in food, entertainment, attire and social attitudes. It was like the US Wild West days, in many ways, repeated in many countries. Enough of the local populations were enjoying the fruits of the globalization of supply and demand, that, oftentimes, the long-term consequences of putting up another factory or clearing the forest for a cattle ranch were not considered.

Slowly we were making change in the livelihood of the people, and at the same time environmental degradation and the western push towards hyper-consumerism was being pushed forward. There is no simple answer to these challenges. The intent of the Universal Forum of Cultures is to create more fruitful dialogue and collaboration between people and nations that are each doing their own initiatives towards a more holistic view of business and development. How do we maintain and advance ethical standards in or treatment of each other, businesses and the environment?

What can you do to help? It is up to each individual to act. We can't wait for the government or businesses to act. Ultimately it is our action, whether we are voting in elections or voting with our dollars, that makes the difference.

Marilyn Tam is an influential corporate leader, speaker, consultant, author, respected philanthropist and social activist. www.HowToUseWhatYouveGot.com

Marilyn Tam's book, How to Use What You've Got to Get What You Want, receives an average 5-star rating from Amazon.com customers. In her book, Ms. Tam talks about how to discover your own inner North Star, and how to use it to navigate your efforts to achieve maximum personal success. The hardcover is just $14.00 on Amazon.com.

Check it out! Click here.

If you'd like to read more on how the companies Marilyn Tam worked for helped to eliminate child labor in the garment industry, click here.

Calendar:

Money Make-overs, Networking Luncheons, Conferences, galas, chats, teleclasses, seminars and other special opportunities! Check out what’s happening online at the Calendar section of the web site, at www.NataliePace.com.

6.15.2004 -- MONEY MAKE-OVER & NETWORKING LUNCHEON. Financial Wisdom: Warren Buffett and Peter Lynch, two of the most successful investors ever, have investing secrets. You should know them. Network and get financially fit over buffet luncheon. Investing can be as much fun as shopping for shoes! $35-$45. Call (818) 428-3283 or CLICK HERE to register online.

6.16.2004 -- NEED AN INDIVIDUAL MONEY MAKER-OVER? Dr. Audrey Reed will be in the NataliePace.com CHAT room on Wednesday, June 16, 2004 at 8:45 a.m. PST. MARK YOUR CALENDARS!

6.22.2004 - Women's Technology Leadership Panel, in Costa Mesa. Business Leaders share their success secrets & encourage others, especially women, to succeed in the world of business on a local, national and global stage. $15-$30. Email Joanne Smith at joanne@awtsocal.org or register online at the calendar section of the NataliePace.com web-site.

6.23.2004 -- Want to discuss rising interest rates with a pro? Wonder how rates affect bonds? What should you do if you have a variable rate real estate loan? Join Bryon Snider in the NataliePace.com CHAT Room on Wednesday, June 23^rd for a Closing Bell Chat at 1:00 p.m. PST.

6.23.2004 - Step Up Los Angeles Enterpreneur's Panel. 210,000 businesses in LA are owned by women. Would you like to become the next successful female entrepreneur? Listen and learn from 6 highly successful leaders. $20. Limited space. Register early! For more info email: amanda.thompson@ticketmaster.com or register online at the calendar section of the NataliePace.com web-site.

VISION: To build a global community of investors through seminars, a world-wide web-site and, ultimately, television.
GOAL: Working change: To promote successful investing and ethics in business.
MISSION: To build a global investment community by providing easy access to important financial news, by promoting a dialogue between members and industry professionals and by promoting ethical business practices, products and services.
PHILOSOPHY: The W.I.N. philosophy centers around five principles: Ongoing Education, Monthly Commitment, Diversified Portfolio, Ethical Business Practices, Pooled Resources.
For more information on W.I.N. contact us at info@NataliePace.com

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