Vol.1 Issue 50 July 1st. , 2004
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of the Week:
"Corporate margins have been outstanding and are now at
35-year highs... Expect a difficult environment for stocks this
summer, although a late 2004 renewed rally still seems plausible
following the elections."
Tobias Levkovich, Smith Barney
from the Portfolio Strategist, 6.24.2004
Car of the Stars, But Should You Own the Stock?
By Natalie Pace, CEO, NataliePace.com. If you don't remember
the Chrysler crisis of 1979 or know the name Lee Iacocca,
it will pay for you to read on
in Before the Crunch of Inflation and Rising Interest
Rates. by Paul Woods, CEO, Odyssey Advisors. 6 Sectors
to Avoid, and 5 That Stand to Profit. www.OdysseyAdvisors.com.
Than Money: True Stories of People Who Learned Life's
Ultimate Lesson.by Neil Cavuto, host of two top-rated
business shows, Your World with Neil Cavuto and
Cavuto on Business, both on Fox News. In an
excerpt from his New York Times bestselling book, Neil
writes about the challenges of being a public figure
with a very private disease.
Ways to Protect Yourself from Rising Interest Rates
in Real Estate, Bonds, Credit Cards, Car Loans and Stocks.by
Stefan Whitwell, CFA, Managing Partner, Tierra Capital,
Your New Home in Fall, and Save Thousands of Dollars.
by Natalie Pace, CEO, NataliePace.com.
Capitalists to Buy Clean Air. Q&A with Dr. Richard
Sandor, the Chairman and founder of the Chicago Climate
Your Tax Haven When Bonds are Shooting Blanks. By
Yong Xu , Junior Portfolio Manager, and Meri Anne Beck-Woods,
Chairman & CFO , Odyssey Advisors LLC 310-568-4700
Things You Need to Know About Google BEFORE Bidding
in Their IPO. By Natalie Pace, CEO, NataliePace.com.
Mid-Summer Report Card. A list of the companies
we've featured since January 2003, along with their
performance. Yes, we're a little proud.
Rich AND Save the World With Socially and Environmentally
by Gregory Wendt, CFP
or (310)227-8050 x122.
Self-Care in the Work Place can Inspire and Rejuvenate
You and Your Staff. By Rebecca Bowler, founder of
Rebecca Bowler Healing Arts RBHealingArts@nyc.rr.com.
President Clinton to Larry Kudlow, on Iraq, rising interest
rates, real estate and more
a romantic rock 'n roll weekend in Woodstock, with country
Don't Miss Forbes' Investing Seminar this month
in Seattle or the Women's Leadership Exchange Long Beach
Conference on August 3, 2004. Money Make-Overs, Networking
Luncheons, Conferences, Galas, Chats, Teleclasses and
other special opportunities! Check out what's happening
online at the Calendar section of the NataliePace.com web site.
Car of the Stars, But Should You Own the Stock?
Natalie Pace, CEO, NataliePace.com.
SUV, the Hybrid is here! Hybrids save gas and money. They promote
cleaner air. Cameron Diaz, Harrison Ford, Susan Saradon and Robin
Williams, each showed up at the Oscars last year in their new
Toyota Prius. Larry David drives a hybrid on Curb Your Enthusiasm.
You know that your gas-guzzling SUV is so last year, when Ford
has three cars on the EPAs Top Green Cars list! Buy the
cars, but should you own the stock? If you dont remember
the Chrysler crisis of 1979 or know the name Lee Iacocca, it will
pay for you to read on...
Trend's 2004 Car of the Year
hybrid sales are up, but you're still more likely to see SUVs
and other gas-guzzlers on the road. The Toyota Prius accounted
for less than 2% of the sales at Toyota Motor Company in May (a
record-breaking sales month), with only 3,962 sold, compared to
company-wide sales of 202,420. One of the problems is getting
your hands on one. Waiting lists for the Prius are from six to
ten months (depending on where you live). The other prohibitive
factor (and consumer surprise) is that going green comes at a
price. The Honda Civic Hybrid starts at $19,650, while the Civic
Coupe's Value Package rings up at just $13,410. The additional
$6,000 buys a lot of fuel, even at today's outrageous prices.
are the fuel savings? Easily double that of most cars and triple
that of SUVs and pickups. The Toyota Prius boasts up to 60 miles
per gallon. Honda's Civic Hybrid is getting 45 MPG or more, and
even the Ford Escape hybrid SUV only sucks up a gallon every 38
miles. Compare that to 14-18 mpg for the Ford F-150 and competing
pickup trucks, 13-17 mpg for the Cadillac Escalade AWD and only
24-33 mpg for the Toyota Camry.
So, as an
answer to global turmoil over oil, rocketing fuel prices and a
general concern that global warming might (just might) be real,
if you swallowed the "green" premium, which hybrid should
you buy? Well, if you trust Motor Trend magazine, it's
the Toyota Prius, which received the highest honor a car can achieve
last November--Car of the Year. Motor Trend's editor-in-chief,
Kevin Smith, writes, "The Prius is a capable, comfortable,
fun-to-drive car that just happens to get spectacular fuel economy."
Toyota Prius has been winning awards, however, Honda's Civic Hybrid
wins the popularity contest. Honda's two hybrids, the Civic Hybrid
and the Insight, accounted for 53% of the hybrid market in 2003,
with the Civic Hybrid beating out Prius, (as measured by car registrations,
21,750 to 20,387 respectively per R. L. Polk & Co. data).
Writers for the Associated Press and the Wall Street Journal admit
that though the Civic Hybrid is small and plain compared to the
sleek Prius, it feels the "most normal," with "no
awkward silences or jerky starts." The Civic Hybrid includes
a 3-year/36,000 mile limited warranty on the car and an 8-year/80,000
mile warranty on the battery.
be surprised to learn that Ford was the first to release a hybrid
SUV, and that Ford's CEO, Bill Ford, is known as a "greenie"
who furnishes his office with environmentally friendly furniture
and building products (including ceiling tiles made from recycled
newsprint). "Our vision for the future is simple," Mr.
Ford writes. "We want to build great products, a strong business
and a better world." Ford has many "green" cars
that are rated right behind Honda, Toyota and Nissan for fuel
efficiency and reduced greenhouse gas emissions, namely the Mazda
3, the Ford Focus and the Volvo S60 and V70.
expected to have a hybrid SUV for 2005. Honda will release its
hybrid Accord in the fall, and DaimlerChysler has a new diesel-electric
V8 Mercedes sports car that gets 30 mpg. For more information
on the most "green" cars in America, as reported by
the U.S. Environmental Protection Agency, click
prices and celebrity buyers, like Cameron Diaz, Leonardo di Caprio
and Larry David, are keeping hybrids rich in headlines, but hybrids
are not—yet--capturing market share… Production is accelerating,
but sales are still a drop in the automaker's ocean, at just 47,000
hybrid sales in 2003 (per J.D. Power and Associates). J.D. Power
and Associates expects hybrid vehicle sales in the U.S. to reach
101,000 this year, 232,000 in 2005, and 442,000 by 2008. By comparison,
last year, domestic vehicle sales were 16.6 million (according
to the National Automobile Dealers' Association), with hybrids
accounting for less than one percent of the total.
hydrogen fuel cells are the focus of new research and development.
is part of a project team working on hydrogen-based transportation,
with Toyota, Nissan, BMW, two California universities (University
of California at Irvine and the University of California at Davis),
the California South Coast Air Quality Management District, ConocoPhillips
and the National Fuel Cell Research Center, with $91 million in
funding from the Department of Energy. Hydrogen fuel is, however,
"a long way off," according to Jim Press, executive
vice president and COO of Toyota Motor Sales, U.S.A., Inc. Over
the next five years, as part of this project, Honda and Nissan
will assign just 65 fuel cell vehicles, and BMW 15.
Honda is very
aggressively expanding, not just into hydrogen fuel cells and
Asia, but also into new markets. Honda's new jet engine, which
is designed for small business jets (an emerging market), will
be jointly developed, produced and marketed with General Electric.
Honda's CEO and President, Takeo Fukui, says, "It has been
a dream of the company since its creation" to enter the aviation
business. The market for these jet engines is just 200 per year,
but "air taxi" operations for executives are taking
off (so to speak), and both companies are boasting that their
operating margins are appealing. It is an alliance worth watching.
in the Bottom Line: Short Term, Long Term or Avoid the Sector?
expect car sales to pick up later this year as the economy strengthens,
consumer confidence rises, the stock market rallies and unemployment
falls. Ford is introducing a new fall lineup of the Freestyle,
the Five Hundred and the Mustang, all of which are attracting
attention. General Motors has been buoyed up by sales to fleet
customers, like car rental agencies, and DaimlerChrysler (DCX)
is seeing strong sales in the 300 sports sedan, the PT Cruiser
Big Three automakers are expected to lose some of their 59% market
share to Asian carmakers, led by Toyota Motor Corp, according
to Reuters. Toyota's calendar year-to-date sales are up 11.6%
over last year, according to the company. Total year-to-date sales
of American Honda vehicles are up 2.0%, with Year-to-date Civic
Hybrid sales of 12,206, up 19.6% over last-year's results, according
to Honda. Ford admits that U.S. sales were down 3% in May. It
should be noted, however, that Ford is in the middle of restructuring,
reportedly focusing on profitability over market share, eliminating
models with weak demand and focusing on more popular cars.
year's headlines will continue to be captured by Toyota and Honda,
with Ford co-starring as the Cinderella story. This month, Ford
Motor Company raised its second-quarter earnings guidance by 15
cents per share, from a range of 30 to 35 cents per share to a
range of 45 to 50 cents per share, excluding special items, based
upon the strong performance of the company's Financial Services
Sector. In a world where beating earnings by a penny or two is
newsworthy, raising earnings by 15 cents per share is akin to
the underdog Detroit Pistons stomping all over the three-peat
champion Los Angeles Lakers in just five games. Nobody expected
this kind of performance from Ford Motor Company, especially under
the unproven guidance of CEO and Chairman, Bill Ford.
investors may push the share prices of Ford, Toyota and Honda
up on good headlines, and/or misguided notions that hybrids are
a larger revenue force than they are. Day-traders who make a living
profiting on the market's short-term hopes and fears could post
gains with a properly timed buy-in and profit-taking strategy.
Note, however, that share prices on the automakers are up, on
average, 50% this year over last. Positioning your buy-in could
be critical for even a short-term gain.
2005 and 2006, when rising interest rates and inflation are expected
to be a problem, automakers will be hit by higher costs to finance
cars and higher prices of the steel, aluminum, etc. used to produce
cars. Metals' prices are up 30% or more this year over last,
so an increased cost of goods has already begun impacting the
bottom line of automakers. The result could be higher costs for
consumers, fewer financing incentives and slowing demand in the
not too distance future.
There is historic
precedence to warrant concern for the auto sector over the next
few years. During the Carter Administration, when President Carter
raised interest rates to try and stem inflation, and escalating
fuel costs were headlines, both General Motors and the Ford Motor
Company saw their share prices sink by -60%. The Chrysler Corporation,
on September 7, 1979, asked the United States government for $1
billion dollars to avoid bankruptcy. Chrysler recovered without
filing for bankruptcy, thanks to the $1.2 billion loan, the minivan
and the guidance of President and Chairman Lee Iacocca. Losses
by General Motors and Ford were not recovered until well after
Reagan took office, in late 1983. The automotive sector was a
shareholder's sinkhole for seven years!
Bottom Line: Good-bye SUVs!!
choosing hybrids, Americans could push automakers to increase
hybrid production, which would edge the industry closer to reducing
reliance on oil, to cleaner air, to alternative fuel energy and
perhaps, eventually, even shift geopolitical focus away from the
Middle East. Investing now in a car manufacturer's stock, however,
is a risky venture that requires, at minimum, a carefully planned
buy-in and exit strategy. Click
here to view NataliePace.com's Stock Report Card on the automotive
Natalie Wynne Pace does not own shares or positions in any of
the companies mentioned in this article or the accompanying Stock
in Before the Crunch of Inflation and Rising Interest Rates.
Sectors to Avoid, and 5 That Stand to Profit.
Woods, CEO, Odyssey Advisors, 310.568.4700
invest when interest rates rise and inflation soars is a complex
topic. The short answer is that higher inflation and higher interest
rates reduce valuations (p/e ratios) in the stock market. To make
money, you have to own companies whose earnings are growing faster
than valuations will come down. Industries that are typically
hurt by higher energy and raw materials costs (caused by rising
interest rates and rising inflation) include:
Housing and related industries: As interest rates rise,
payments go up and price more and more people out of the market.
[NataliePace.com note: Experts are warning that investors should carefully
examine the REITs in their portfolios.]
Financials: Many banks, finance companies, and savings
and loans have been making a ton of money from mortgages and refinancing.
Higher interest rates will reduce the demand for all these.
Autos: Hit by a double whammy of higher costs to
finance cars and higher prices of the steel, aluminum, etc. used
to produce cars. Result could be higher costs and slowing
Utilities: Many utilities use oil or natural gas
to generate power. Costs go up right away and getting the
approval from public agencies to raise rates takes a while. Remember
the bankrupt utilities in California?
Transportation: One of the biggest expenses for the
transportation industry is fuel. Airlines, railroads, and
truckers typically have a tough time generating high profits when
energy costs are going up. [NataliePace.com note: The Santa rally may
be a good profit-taking, exit time.]
Misc: This includes petrochemicals and a lot of manufacturing.
In many of these industries there is still global excess
capacity, making it hard to raise prices. When raw materials
prices go up, many get squeezed.
Sectors That Benefit from Rising Interest
Rates and Inflation
Energy Companies: Duh, higher prices lead to higher
profits. Higher prices also encourage more exploration and
the reopening of marginal wells, causing a boom for the energy
Metal and Mining: Duh, higher prices lead to higher profits.
Because of low returns and the nightmares caused by environmentalists,
no one in their right mind has opened a new mine in the last decade.
These typically have a long leadtime, so it will take a
while for supply to catch up with current demand. (To view
NataliePace.com's Metals Report Card and article from issue 48, click
Technology: Higher costs cause the bean counters
in charge of most of corporate America to look for ways to cut
costs. By helping to improve productivity, technology companies
usually benefit in such an environment.
Misc: Any company or industry with the ability to
raise prices. Companies with pricing leverage typically
raise prices more than they need to in these environments, causing
a nice boost to profits.
Than Money: True Stories of People Who Learned Life's Ultimate
an excerpt from his New York Times bestselling book, Neil writes
about the challenges of being a public figure with a very private
Cavuto, host of two top-rated business shows, Your World with
Neil Cavuto and Cavuto on Business, both on Fox News.
One: "When Life Throws You A Curve Ball"
not a huge baseball fan, but I like the game, and I am
impressed by the New York Yankees. Because they've won so many
championships and World Series, and because they embody the character
of New York: unyielding, cocky, very much in-your-face.
all the more odd the unassuming skipper who runs this bunch. In
the hurricane that is the big media in the Big Apple, Yankee Manager
Joe Torre is the calm eye in the storm: solid, sure, dependable.
I marvel at
the way this thrice-fired manager, in a job that tends to age
men quicker than the U.S. presidency, only grows calmer over the
years, and more self-assured.
He never screams
or throws fits. He never berates his players on national TV. If
they get hot, he lets them cool down. He prefers talking to each
of them privately, rather than en masse or in public.
As he told
a gathering of hospital executives in June 2001, "I like communication
and talking to people one on one. I don't like screaming. I like
to make sense."
plenty of sense to his team, and to New Yorkers, and he surrounds
himself with people who are much like him: diplomatic doers, not
A good example
is Mel Stottlemyre, the quiet, modest pitcher-turned-coach who,
like his boss, insists on working out his Yankee pitchers' troubles
harmoniously, without fanfare or bravado. He has a rapport with
his players that press reports about him understate.
players don't just like him, they trust him. They know he'll be
there to shield them from the New York media glare. Pitchers like
Dwight Gooden, Mike Hampton, and Andy Pettite, have all said that
they wouldn't have become the successes they did become had it
not been for Stottlemyre.
Stottlemyre proved to be powerful dynamos behind the Yankees'
success and all those post-1996 division, league, and World Series
as their baseball achievements are, though, it's the way each
man handled personal crises that made me decide to include them
in this book.
1999, and Stottlemyre, in 2000, had bigger worries than winning
baseball games and titles on their minds.
had cancer, and their initial prospects looked dicey. Stottlemyre
was afflicted with multiple myeloma, a form of cancer that's usually
fatal. Torre had a particularly virulent form of prostate cancer
-- what doctors call a fast-moving malignancy.
Any time you
hear the word cancer, you're rightly shell-shocked.
Just the word
scares people. Cancer: the Big "C."
my mother was diagnosed with a brain tumor, I remember being aware
that her biggest fear was getting cancer.
so much the hopeless prospects for the disease at the time, but
its debilitating final days.
and vibrant people like my mother it was particularly cruel, sapping
them of the energy and determination that made them unique, in
the end reducing them to little more than human vegetables, painfully
closing out their final days.
and car accidents actually take more lives, but cancer and its
consequences have a singular dominance of our psyche and fears.
do survive cancer feel special. I know I do.
Not a day
goes by, even with my MS, that I don't think of cancer returning;
maybe another bout of Hodgkin's, maybe some lymphoma.
You name it,
I worry about it.
And no cancer
survivor ever loses that queasy feeling that it could happen all
as it is to learn the diagnosis, and understand how your life
has been changed forever, it's worse when you're in a very public
job. There's nowhere to hide. Nowhere to cry. Nowhere to gather
intense pressure on public figures who have to work through very
private issues. Almost as important as how they privately deal
with their issues or diseases, is how they do so when many people,
sometimes across the country, are watching them closely.
the pressure and personal issues well. Sadly, a lot of them do
the stress on Torre and Stottlemyre, as they deal with scary,
preferably private, life-threatening cancers, was that they were
in a profession that transcends business and inspires kids of
all ages, working in the sports world's biggest fishbowl -- New
York -- and with America's most scrutinized baseball team -- the
New York Yankees.
leaders being watched by shareholders curious about how they were
doing, the Yankees manager and coach knew that millions of fans
were wondering and worrying.
once said that you can tell a lot about a person by how he or
she handles sickness. The way these two baseball veterans handled
theirs is revealing and admirable.
As I discovered,
they focused far more on others than on themselves. I'm sure that
in private they had their difficult periods, dealing with the
stark fact of cancer and their individual fears and doubts. Publicly,
though, they put it all aside and led by example. No matter what
their pain and suffering, they were going to hold it together
-- not only for the team, but for the world. That's an enormously
selfless act, at a time when it would have been understandable
to be selfish. These men were not.
is excerpted from More Than Money by Neil Cavuto. All rights reserved.
No part of this book may be used or reproduced without written
permission from HarperCollins Publishers, 10 East 53rd Street,
New York, NY 10022
information or to purchase More Than Money, by Neil Cavuto,
Ways to Protect Yourself from Rising Interest Rates in Real Estate,
Bonds, Credit Cards, Car Loans and Stocks.
you cannot afford the home with fixed rate debt, and you can only
afford it by using adjustable rate
mortgages, then perhaps you should be buying a less expensive
property or not be buying at all." -Stefan Whitwell.
Whitwell, CFA, Managing Partner, Tierra Capital, L.P. http://www.tierracapital.net
the biggest media topics of interest in the last month (no pun
intended) was the prospect of rising interest rates. Let's start
simple. People talk about "interest rates" as if they
were a single ‘thing,' when in fact there are several interest
rates that affect us. For example: there is the Fed Funds rate
and the prime rate. There is the rate that your credit card charges
you, the rate that your bank charges you on your mortgage, and
there is also the ten-year bond yield, which affects the rate
at which you can refinance.
broadly defined, is simply the cost of money. Different banks
lend at different rates, and even the same institution will lend
money at different rates depending on the credit of the borrower
and the length of the loan. There are a variety of rates out there.
Rule #1: Factor in interest rates for car leases, loans and credit
week, I was shopping for a car for my wife and had narrowed it
down to the Acura MDX (which is their SUV) and the Volvo XC 90.
For a variety of reasons we wanted to lease, so after checking
out the vehicle I wanted to collect information on their leasing
plans. Once the Acura salesperson arrived, I tried to sidestep
the usual pleasantries and launched into specific lease questions.
I had done my homework on leases, and just wanted the facts so
I could compare.
"Hi, yes, great, thank you. Do you have any lease specials?"
"Yes, of course, please come this way, answer a few questions
and we'll get started. What is your name? How did you hear about
us? What are you looking for?"
"Before we start filling anything out, can you please just
give me an indication of what your monthly lease payment would
be on the 2004 MDX if we assumed 12,000 miles per year, a 36 month
lease, excellent credit and that we paid $5,000 down? Oh, and
one more thing, can you please tell me what the interest rate
is that is imbedded in your lease program?"
is no interest. We use a ‘money factor,' which is .0002."
[in the world] is a money factor?" [Keep in mind
that none of the salesmen at the other car companies had used
this term nor was it used in the leasing advertisements that populated
the Sunday newspaper, all of which referred to interest rates]
"A money factor is the thing we use to calculate the monthly
"I'm sorry, but I don't understand your explanation. I'd
like to know what the interest rate is, either explicit or implied,
that quantifies the cost of borrowing."
"Like I told you, in the auto business we don't use interest
rates, we use money factors. It -"
[Interrupting] "Look, it is evident that someone is lending
me money, if I'm walking out of a showroom with a $40,000 car
and have only paid $5,000 down. Since most people in America express
this cost in the form of annual charges we call interest, I'd
appreciate if you can please help me calculate what the rate would
be. And by the way, of the seven other dealers I've visited today,
they all were able to answer the question and none of them mentioned
"Well, if we use the rule of 24, which I don't like to use
really, then the interest rates would come out to somewhere between
5-10%. [The rule of what? By now this guy had called his leasing
specialist over to our table. He was equally confused as to what
I was asking for.] If you wait another ten minutes, we can
look up Volvo's deal on the Internet and try and figure this out
"Considering that Volvo is advertising a 1.9% interest rate
lease special, I doubt that a company as successful as Acura is
offering leases at the uncompetitive rate of 10%. Here is my number.
Please call me if you can figure out the answer to my question."
[The other car companies were around 5%.]
I then collected
my wife and daughter who were in the showroom, and went straight
to Volvo where we immediately leased two new cars.
Rule #2: Read and understand all the financial documents that
you sign. Beware of those who pressure you to do otherwise or
are unwilling to make the time to explain it.
As a consumer, it pays to spend a little time making
sure you know what you are getting. This is particularly true
with credit cards which may start you with low introductory rates
and then jump to much higher rates after a while, which is something
I think most of us have experienced before.
Back to rising
interest rates. For years now, interest rates have been declining.
This meant that the cost of borrowing has been coming down and
down, making things that much more affordable to buy on credit.
This is one of the reasons (but not the only one) the housing
market in the United States has been booming, and one of the reasons
people have been refinancing their mortgages.
and credit card interest rates are going up…
Fed Funds rate is currently 1%. This is the rate that people are
referring to when they say, "Today the Fed raised interest
rates by 25 basis points." There is reason to believe that
this rate could rise to 3 or 4% over the next year or two. This
rate affects the cost of short-term money, which affects variable
rate mortgages and credit cards, or in more general terms, variable
U.S. bond yield, which is used as the key benchmark for a fixed-rate
home loan, is currently 4.66%. This rate has gone up almost 1%
in the last several months, given the market's expectations that
the U.S. economy is recovering, signs of inflation and on account
of the increasing size of the U.S. deficits (which need to be
funded by selling more and more of these bonds). The amount by
which this rate might increase is more difficult to determine.
It is not adjusted per se by the Federal Reserve. An increase
to 5.5% does not seem out of the realm of possibility in the next
year. Banks quote 30-year fixed mortgage rates by adding a spread
on top of the ten-year yield.
what should you do? Whitwell rule
#3: In a rising interest rate environment lighten up on your bond
To the extent that you need current income and you
intend to hold them to expiration, then the new inflation-linked
treasuries might be worth exploring. In addition, there is a mutual
fund you can buy which effectively shorts the ten-year bond, which
means you will profit if the ten-year bond yields increase. There
will be a time in the future at which it makes sense to buy general
bonds again, but not right now.
rule #4: in a rising interest rate environment, think about getting
fixed rate debt on your home and other real estate investments.
The reality is that rates are still at relative lows and if
you cannot afford the home with fixed rate debt and you can only
afford it by using adjustable rate mortgages, then perhaps you
should be buying a less expensive property or not be buying at
three primary variables that determine whether rising rates are
good or bad for real estate. First, in general, if you have
fixed rate debt and interest rates go up, then you are protected
since your interest payments will not change. On the other hand,
if your debt is floating and rates go up, your cash flow goes
down. Second, if interest rates are going up because of broad-based
inflation, which in turn is driving up rents, then real estate
benefits from increasing cash flow. Conversely, if interest rates
are going up and you have floating rate debt (higher interest
payments), but your rents are static, then your net cash flow
will decrease. Finally, if your expenses are going up because
of broad-based inflation and your rents are going up too, then
to some extent the answer depends on whether costs are going up
faster or slower than rents. Keep an eye on the type of financing
you use, rent movements and expense levels.
about stock investments?
the long run, equities represent an important asset class. However,
at present time my view on stocks is mixed. Stocks will first
and foremost respond to the overall economic mood in the United
States, which of course is impacted by interest rates. Right now
the stock market appears to be fairly valued and therefore could
go up or down. However, in either event it is unlikely that such
a move would be dramatic in nature. Sectors that will be most
impacted by rising interest rates will be capital intensive businesses
like construction, commercial banking and mortgage banking.
don't let all this interest rate talk scare you. The U.S. economy
remains strong and is proving to be resilient. Do take care
though to review your portfolio and position yourself for a period
of increasing interest rates. And above all, assert your right
to know what you're signing, and make sure you understand how
much you are paying in interest. I have seen more than several
real estate deals recently that have been hamstrung because the
current owner signed loan documents several years ago that they
did not fully understand. When the time came that they wanted
to sell, they discovered that the pre-payment provisions were
so burdensome that most of their profit on their sale would go
to the bank in the form of pre-payment penalties. (Normally on
single family homes, there are no prepayment penalties, but there
can be in commercial loans). These owners are very frustrated.
Had they only read their documents!
You and I
can't control interest rates but we can position ourselves to
profit from moves in rates either way. Take a look at your portfolio
now, and ask yourself what actions you can take that will benefit
you in this environment. Go back and read your loan documents
to make sure you understand how interest rates affect your assets
and liabilities. Make It Happen!
Your New Home in Fall, and Save Thousands of Dollars.
like plants, have their season. In real estate, there is a season
called "The Four Ds. " If you don't know it, you're
probably overpaying for your home.
depression, divorce and disaster. Winter is the off-season for
real estate. Why? Statistics DO NOT unilaterally support the commonly
held belief that winter is the season of horror, but that is the
perception, and in investing, perceptions are often more powerful
than reality. The Center for Disease Control has studies to support
that suicides are actually more frequent in summer than winter.
However, the annual return of hurricanes in the Atlantic happens
in fall, after the summer rush to buy homes is over, and homebuyers
have moved into their new purchases and put their kids into the
local schools. The Great Depression and Black Monday, two major
corrections in the stock market, both occurred in October. 9.11.01
was, sadly, in September. The Northridge earthquake was in January.
Why wait for
winter to look for real estate? It's a simple case of supply and
Demand. If you're looking to buy in the summer, especially this
year with record sales, you're competing with multiple bids and
will likely pay above the asking price of the property, IF you
are successful in putting the home into escrow. On the other hand,
if you wait just a few months, until October, there will be fewer
homes to choose from, but there will also be far fewer buyers
to compete with. Additionally, if there is any type of bad news
at all in the meantime, the few homeowners still looking to sell
in fall, after seeing their homes sit through summer for one reason
or another, may panic and drop the price, sometimes significantly.
In truly terrible disasters, like earthquakes, terrorist strikes,
fires, stock market corrections, etc., real estate values plummet
uncanny how reliable the winter season is for lower prices in
real estate. In the late summer of 2001, a friend of mine was
determined to buy a home while interest rates were so low. In
order to find a place they could afford, Jane and her husband
went out of their dream neighborhood and decided upon a fixer-upper
with more mandatory, immediate repairs than they were really able
to afford. She and her husband put the home into escrow and were
still in the transition period on September 11, 2001.
loss on 9.11 inspired Jane to take a hard look at the termite-ridden
home she was about to close on and call her own. Instead of proceeding
forward, the couple gave up their deposit and backed out of the
deal. If they were going to spend every last penny they owned
on a new home, at least they were going to love the place.
One day in
October, Jane and her husband were driving around their dream
neighborhood, in a part of town they couldn't afford when they
were looking over the summer. They almost didn't bother stopping
at the FOR SALE sign, but, being a Sunday, a day of leisure, decided
to take a tour. They now own their dream home, at a price they
can afford. It wasn't a fixer-upper. In fact, the only major purchase
they had was to add a Jacuzzi! The person selling the home had
been personally impacted by 9.11.01, and needed to get out of
the property fast. Both families benefited from the sale.
October to look for and/or purchase your home or real estate investment
is likely not going to cost you as much in interest (assuming
rates go up) as the multiple bids and high markets of today will.
If someone is motivated to sell in winter, chances are they are
in need of liquidating the property in a narrow time frame. If
they were disinterested sellers just looking to get the top dollar,
the property would only be available during the sizzling hot sales
months of summer. Information and patience always work to the
advantage of the seasoned investor.
Convincing Capitalists to Buy Clean Air.
with Dr. Richard Sandor, the Chairman and founder of the Chicago
Natalie Pace, CEO, NataliePace.com
A reprint from
NataliePace.com, issue 31.
Sandor has convinced Ford, Dupont and thirteen other corporations
to voluntarily reduce greenhouse gas emissions and to reforest
Brazil. He's a visionary with a plan to improve our WORLD, ONE
BREATHE and ONE TREE AT A TIME.
is changing and the pictures that prove it are startling. In 1890,
the state of Parana, Brazil was covered in rain forests. By 1997,
the rainforests had almost all disappeared.
March of 2002, Antarctica lost an ice sheet bigger than the size
of Rhode Island. Steven Chu, a Nobel laureate in physics and the
Chair of the Department of Physics at Stanford, expressed concern
over global warming last year at the Milken Global Economic Conference,
saying, "Over the last 44 years, the amount of CO2 in the atmosphere
has increased dramatically. CO2 has just done a spike, which we
have never seen in the last half a million years. We know that
CO2 is a green house gas... We don't know what is going to happen…
The polar caps are melting… People are talking about a passage
to Asia through Canada because that ice is now melting.. Bangladesh
[could] go underwater.. There are a lot of unknowns."
COVER, STATE OF PARANA, BRAZIL
States is by far the biggest contributor to greenhouse gas emissions,
generating 25% of the annual global CO2 emissions worldwide, 6.5
billion tons of the 26 billion tons (source: Energy Information
Association: Dept. of Energy). Electric generation sources annually
emit more than 2 billion tons. Transportation is the other top
emissions offender. The Kyoto Protocol, which President Bush refused
to sign, required nations to commit to reducing emissions to 5%
below the 1990 levels by the year 2012. Without mandatory reductions,
the Pew Center on Global Climate Change, estimates that the U.S.
emissions of greenhouse gases will GROW by 12% by 2012. Will Bangladesh
fall into the sea before the world wakes up?
American business is just carrying on as usual until regulations
force them to change their ways? Think again! Dr. Richard Sandor,
the Chairman and Founder of the Chicago Climate Exchange, has
convinced fifteen of the leading international corporations and
the City of Chicago to sign onto the Chicago Climate Exchange's
voluntary, but binding commitment to reduce greenhouse gas emissions
by 1% below baseline for 2003-2006, and by 4% below baseline by
2006. He's in talks with 80 other corporations, as well. How did
Dr. Sandor succeed where the Kyoto Protocol failed? What are carbon
rights and how do you commoditize and price natural resources?
Read NataliePace.com's interview with Dr. Sandor to learn how founders
get innovative, untested ideas--like creating markets to protect
natural resources--off the ground.
The 15 Founding and Charter Members of the Chicago Climate Exchange
are: American Electric Power, AEP, Baxter International Inc.,
the City of Chicago, DuPont, Equity Office Properties Trust, Ford
Motor Company, International Paper, Manitoba Hydro, MeadWestvaco
Corporation, Motorola, Inc., Roanoke Electric Steel Corporation,
STMicroelectronics, Stora Enso North America, Temple-Inland Inc.
and Waste Management, Inc.)
Pace—Americans see startling photos of deforestation and melting
ice sheets, yet so many of us continue with old habits. What does
it take to convince consumers and companies to give up a little
comfort now for the sake of our children?
What kind, if any, discomfort results from lower greenhouse
gas emissions? Is it possible to have a net gain? We are in the
business of trying to develop financial institutions and infrastructure
to deal with pricing carbon. The debate can't be brought to an
adequate conclusion until we know what the price of carbon is.
We're here to inform the debate more than anything else. Rather
than, basically, hypothesize or build models, we really need to
be Orville or Wilbur Wright. We need this thing to fly for 56
seconds to prove that you can use the price system to effectively
allocate air, water, etc. That's the part of the debate that we're
technology and development needed to reduce emissions prohibitively
expensive for companies? How do you tempt corporations, that have
just now returned to capital spending, to sign on? Are the 15
Founding and Charter Members signing on for altruistic or commercial
think they're signing on for both of those reasons. They're signing
on because, as one of the companies said it, "We really want to
learn about energy efficiency and carbon pricing and how they're
related." When asked, what side of the debate he was going to
be on, he justifiably answered, "It depends on what the price
is." It depends upon the company's abilities to learn and what
incentives are provided. We've got to paint the picture. Another
motivation is that corporations see a trend among their shareholders.
Over $2 trillion is environmentally screened in the U.S. capital
markets. There's a school of thought that companies have a 1-2%
"sustainability" premium in their stock price. There seems to
be customer demand on that side.
may be able to be low-cost providers of carbon credits. Another
facet of the issue is a desire to participate in the policy debate,
to learn what kinds of things should be included in the trading
systems, and what form that debate takes. [Corporations] want
to have an opinion that is based upon experience and data, and
to advocate their positions with solid information. And a very
important reason is that pro-active action on climate change is
being perceived as the right thing to do. There is growing scientific
evidence suggesting there is a significant problem, and they want
to be seen to be on the right side of the issue. There are also
threats to shareholder value in the form of growing demand for
corporate disclosure on climate change action, shareholder resolutions
and increased liability. You have risks and rewards driving the
process, as well as people believing in the right thing. So, the
primary incentives are:
shareholder value and demand from stakeholders;
to shareholder values; and
desire to be on the right side of an issue with potential global
literature quotes the Economist as projecting that "carbon credits"
will have an annual trading volume of $60 billion to $1 trillion?
What is a carbon credit? Please explain how these credits will
be traded, and when those projected numbers will become a reality?
carbon credit is an allowance. This is going to be a system of
allowance and offsets. Like the Sulfur Dioxide trading program,
you would be allowed to emit a certain amount, then you would
have a targeted reduction. Let's say it was a million tons, and
you promised to get it down to 990,000 tons. If you knock it down
to 980,000, you have 10,000 allowances or credits. Those extra
allowances can be sold to somebody who hasn't met their commitment.
The result of this will be that the people who can cut most efficiently
will do so. They have an incentive to do so because they can sell
their excess cuts. Those people who can't are going to buy them.
That will be the cheaper cost to society of reaching the lower
do you draw from the U.K., Denmark, Massachusetts and New Hampshire's
attempts to implement their own greenhouse gas markets? Just how
is the Chicago Claim Exchange poised to address the problems of
environmental pollutants BETTER than the public sector?
believe in free markets, and we believe that the government shouldn't
be in the chip, semiconductors or financial exchange business.
The right comparison is that this is a voluntary approach. We're
multi-sector. None of the other emerging carbon markets has the
involvement of the agriculture or forestry sectors. We're multi-national.
It's apples and oranges. We have looked at these markets, and
there are lessons to be learned from them. This is just one more
evolutionary step to a full-scale market.
does the Chicago Climate Exchange bring sustainable farming and
forestry practices into the equation? What are your plans for
Brazil, and what other areas globally do you believe are ripe
systems only allow you to buy or sell credits that come from emission
reductions elsewhere in the system. We allow offsetting behavior.
For example, if you are a utility, you can reduce net emission
in your entity by doing offsetting behavior, such as planting
trees or changing soil practices. In a hypothetical example, you
can eliminate a million tons out of the smokestacks, or you can
sequester 20 million by bringing in carbon sequestration from
reforestation. Agriculture and forestry--we think that these are
beneficial effects to society, in addition to the carbon in the
trees, wetlands, etc., in the form of improved soil and water
the reforestation deal that you coordinated with the Montana Indian
Bureau, how it works and what the results so far indicate.
This was a
deal coordinated by our predecessor firm--Environmental Financial
Products. We were engaged by the Salish and Kootenai tribes. They
had lost some forest area to fires. We represented them and
we sold the future carbon that would come from reforesting parts
of their land. They took the proceeds and bought seedlings. The
buyer was a European firm that wanted to own carbon credits. It
was a novel, cross-border trade.
Note: The purchase of "greenhouse gas emissions offsets," aka
reforestation, was a coordinated effort between Dr. Sandor, then
Chairman of Sustainable Forestry Management, the Confederated
Salish and Kootenai Tribes of Montana and the Montana Carbon Offset
Coalition. Mr. Tom Corse, Supervisory Forester for the Montana
Tribes was pleased to be part of the "win-win" deal, saying, "This
first project will set the stage for a process that will help
fund chronically under-funded tribal reforestation projects…and
start the ball rolling on market-based solutions to global warming.")
companies that make up the Founding and Charter members of the
Chicago Climate Exchange have carbon dioxide emissions of 275
million tons annually, which is half of the annual CO2 emissions
of the U.K. Is the commitment that they've signed, binding them
to reduce emissions by 4% by 2006, enough?
purpose of this is a pilot program. It's a demonstration project.
The job is to build the institutions. It's like saying to the
Wright Brothers, "You only flew for 56 seconds. You couldn't even
carry mail on that plane, so what good is it?" We want to build
the institutions. Markets are like personal computers. What Steven
Jobs had in the garage in Berkeley was a very rough copy of what
you have today. Financial innovation is like industrial innovation.
It occurs with a big idea and then subsequent refinements. We
hope to prove that it will fly. You can build the banking, verification,
monitoring, protocol, and prove that the system works and will
evolve over time.
of the Chicago Tribune characterized this voluntary program, saying
that companies "swap the right to pollute." According to Frank
O'Donnell of the Clean Air Trust, the cap and trade program you
designed to reduce acid rain (sulfur dioxide) reduced emissions
nationwide by +30% from 1990 levels, which, in our estimation,
is worthy of note. However, in certain states, like Southern California,
New Jersey and Michigan, the emissions increased and were a threat
to local health. What do you say to naysayers who believe the
CO2 program will have the same affect of overburdening some local
global warming, and so Michigan doesn't warm any more or less.
When you put up a ton of carbon, it doesn't matter where
you emit it. It has a global impact. Carbon dioxide is a global
pollutant, whereas sulfur dioxide is a local pollutant. The argument
isn't relevant there, but with regards to sulfur dioxide, it's
a reasonable concern. Under the Clean Air Act of 1990, states
can have local ambient air standard. New York is now tightening
up. States can have prevailing law that may have been missed by
the national program.
have more questions about this novel new program, how it works
or if your corporation can sign up, go to www.ChicagoClimateX.com.
Will Dr. Sandor
convince most of the 80 corporations that he's in contact with
to sign on to his Exchange, save the world and win a Nobel prize
to boot? Will Americans catch on to the hybrid craze, started
by Cameron Diaz, Harrison Ford, Susan Sarandon and Robin Williams,
who showed up at the Oscars last year in their new Toyota Prius?
You know that your gas-guzzler is so last year, when Ford has
three cars on the EPA's Top Green Cars list!
Your Tax Haven When Bonds are Shooting Blanks.
experts warning against bonds, where can you put your money? Which
IRA is right for you, and how much can you deposit each year?
Yong Xu , Junior Portfolio Manager, and Meri Anne Beck-Woods,
Chairman & CFO , Odyssey Advisors LLC 310-568-4700 www.OdysseyAdvisors.com
are often considered to be the safe part of your portfolio, but
with rising interest rates on the horizon, financial experts are
warning investors of the downside and risks of owning bonds. A
portion of your portfolio should be allocated to relatively safe
investments. Also, if you're not already contributing to an Individual
Retirement Arrangement, IRAs offer tax savings and tax deferral
benefits for the individual investor to consider.
because one eventually gets one's money back on a bond doesn't
mean one can't lose money. Bond values go down if interest rates
rise, and one must be alive at the maturity date to get face value."
Pete Colhoun, from Pete's 13 Biggest Mistakes Investors Make
should watch out for investing in the bond market at a time when
bond yields are at 40-year lows. The belief that bonds are less
volatile than stocks is a false one." Meri Anne Beck-Woods,
Chairman and CFO of Odyssey Advisor
Roth or Not to Roth: That is the Question!
The Roth IRA (Individual Retirement Arrangement) offers tax-exempt
savings, while the traditional IRA offers tax-deferred savings.
Therefore, if one is in a lower tax bracket when saving,
the Roth IRA is likely to be better. Conversely, if one
is in a higher tax bracket when saving and expects to be in a
much lower tax bracket when withdrawing earnings, a traditional
IRA may be the better choice.
is an IRA, anyhow, and how does the Roth IRA differ from the traditional
Individual Retirement Arrangement (IRA) is a personal retirement
savings plan available to anyone who receives taxable compensation
during the year. It brings together two tremendous advantages
in investment: 1) compound interest, and 2) tax savings.
The two kinds of IRA we hear the most about are the traditional
IRA and the Roth IRA. A traditional IRA
is the term for a regular IRA available to those under age 70
1/2 who have earned income (i.e., job compensation). The
Roth IRA was born on January 1, 1998 as a result of the Taxpayer
Relief Act of 1997. It was named after former Senator William
V. Roth, Jr. A comparison of these two forms of IRAs follows:
1. Tax Deduction - Age and Income Matter
to the traditional IRA is tax-deductible. Also, the earnings on
the contributions won't be taxed until investors withdraw that
money many years later. When the withdrawal happens after age
59 1/2, only then, will the money be taxed as income at the investor's
ordinary income tax rate.
Unlike a contribution to a traditional IRA, a Roth IRA contribution
is never deductible. However, when investors withdraw the money
from a Roth IRA, none of it -- and that includes the earnings
-- will be taxed, assuming that the Roth IRA has been open for
at least five tax-years and you are older than age 59 1/2.
2. Eligibility - Lifetime or Age Based
regular IRAs, one loses the ability to make
contributions at the age of 70 1/2. Contributions to a traditional
IRA may or may not be tax deductible depending on the investor's
income tax filing status, adjusted gross income (AGI), and eligibility
to participate in a tax-qualified retirement plan through employment.
If the investor participates in an employer's qualified
retirement plan, the deductibility of contributions phases out
based on the AGI limit schedule. A working spouse not covered
by a retirement plan through employment may make a tax-deductible
contribution of up to $2,000 annually despite the other spouse's
coverage. When the couple's AGI reaches $150,000, deductibility
for such contributions begins to decline, and it reaches zero
at a joint AGI of $160,000.
For Roth IRAs, one can set up a brand new Roth IRA at age
15 or 85, and begin saving for "retirement," so long as
the compensation income requirement is met! You can make a contribution
to a Roth IRA even if you participate in an employer sponsored
retirement plan. In 2003 and 2004, these contributions can be
as much as $3,000 ($3,500 if you're 50 or older by the end of
the year). There are just two requirements: 1), an individual
or spouse must have compensation or alimony income equal to the
amount contributed, and 2), modified adjusted gross income can't
exceed certain limits. For the maximum contribution, the limits
are $95,000 for single individuals and $150,000 for married individuals
filing joint returns. The amount one can contribute is reduced
gradually and then completely eliminated when modified adjusted
gross income exceeds $110,000 (single) or $160,000 (married filing
3. Minimum Distribution Rule - Forced vs. Individual
For the traditional IRA, withdrawals must begin, and will
be taxed, when the owner reaches age 70 1/2. If required distributions
are not taken at that age, a 50% penalty will be assessed on the
amount not taken.
A Roth IRA is not subject to the minimum distribution rules. This
means that you will not be required to remove any of your Roth
IRA funds in the year in which you turn age 70 1/2. This being
the case, a Roth IRA will allow you to continue to build up the
value of the IRA free from all income taxes for the benefit of
Most people are better off in the Roth IRA. If an individual can
take advantage of the tax-exempt feature by maximizing contributions,
this will add greater tax leverage to retirement savings.
Moreover, with the Roth IRA, the investor can take advantage of
early distribution without paying a penalty under certain circumstances.
These circumstances include the IRA owner's death, disability,
first-time home purchase (subject to a lifetime limit of $10,000),
and qualified higher education expenses for the owner and/or eligible
So which one is better? There is no simple answer.
The decision rests on a number of factors, including when
you withdraw money from your IRA, what will your tax bracket be
then, what earnings can you anticipate in the interim, and the
size of your estate. Only you [with the help of a financial
professional] can decide if a Roth IRA is better or not.
Converting from a traditional IRA to a ROTH IRA. You
can convert all or part of your traditional IRA to a Roth IRA.
It is reported there are still a large percentage of eligible
people who have not done so. Here is some simple guidance.
1. Eligibility: First
your modified adjusted gross income cannot be more than $100,000.
It does not include income from the Roth IRA conversion
itself. Second, the tax filing status cannot be "married
but filing separately."
2. Partial Conversion:
If the full conversion pushes the tax bracket too high,
you can convert a portion.
3. Ways to Convert:
You can have the trustee for your traditional IRA transfer
funds to a Roth IRA maintained by the same trustee or a new trustee.
You can also take a distribution from the traditional IRA
and transfer to a Roth IRA.
4. Deadline: To
meet the deadline for a conversion in the current year, you need
to have the money or assets distributed from your traditional
IRA by December 31. Then the distributed funds can be transferred
to the Roth IRA after the end of the year and still have it count
as a conversion for the current year.
Once the decision has been made, you will find starting a Roth
IRA is quite easy. Here are several suggestions to get you
1. Select a Provider:
often accept relatively small accounts and have relatively simple
procedures, making them an attractive choice for people who want
to start out small. A bank, however, isn't likely to offer as
many investment alternatives as a mutual fund company or brokerage
companies may be appealing if you want to invest your IRA
in an annuity or you find some other investment offering of the
insurance company attractive.
fund companies can provide a wide range of investments. You
may be able to invest parts of your IRA in different types of
funds, achieving the mix that's right for you.
brokerage firms offer IRA accounts. These are often called
self-directed IRAs because they give you the ability to make specific
investments or design your own portfolio.
You should pay attention to fees. Many IRA providers
may charge around $30 a year to maintain an IRA, but some do not
charge anything. Also, you should consider trading commissions.
As the contributions are limited to $3,000 a year per person,
an extra charge of $100 a year may reduce your account balance
by tens of thousands of dollars over time.
2. Open and Fund an Account
Establishing your IRA can be a simple as walking
into a bank or brokerage office, filling out a few forms and writing
a check. You can also set up an IRA over the Internet. You
are permitted to decide who receives you IRA after your death.
The beneficiary can be your living spouse. However,
if you're putting a substantial amount into your IRA, it may make
sense to consult an estate planning professional. Finally,
make sure you have a safe place for all records pertaining to
your IRA, where you'll be able to get at them when it's time to
fill out your income tax return or make a change in your investments.
3. Start Investing! The best type of investment
depends on the size of your IRA and time horizon. If you
have other savings, such as a brokerage account or a 401k account,
consider whether your IRA can be invested in a way that provides
more balance to your overall portfolio. Remember, if you're
new at this or just don't have the time to critically evaluate
individual stocks, you might want to consider an index fund.
IRS document related to IRA:
provider comparison table:
The other types of IRAs include Simplified Employee Pension
(SEP-IRA), Savings Incentive Match Plan for Employees IRA (SIMPLE-IRA),
and Education IRA (EIRA).
SEP-IRA is a retirement plan designed for a small employer
to establish a retirement plan for employees without the complex
administration and expense found in qualified retirement plans.
Under a SEP, the employer may make a contribution of up to the
lesser of 15% or $30,000 of compensation to IRAs established in
each employee's name. The employees own these contributions
entirely, and may withdraw and/or transfer at any time. As
of January 1, 1997, no new SEP may be established. It has
been replaced by the new SIMPLE arrangement.
SIMPLE, established by the Small Business Protection Act
of 1996, may be set up by employers who have no other retirement
plan and have 100 or fewer employees, with at least $5,000 in
compensation in the previous year. They may be structured as an
IRA or as a 401(k) plan. In 2004, employees may defer any percentage
of compensation up to $9,000 per year to the SIMPLE, and the employer
is required to make a matching contribution of up to 3% of the
employee's pay. Starting in 2002 those over the age of 50
may make an additional "catch-up" contribution with a limit of
$1,500 in 2003, and $2,000 in 2005. Contributions are immediately
vested with the employee, and deposits and earnings in the account
will accumulate tax free until withdrawn. In general, distributions
from a SIMPLE are taxed like those from an IRA. Withdrawals prior
to age 59 1/2 are subject to the 10% early withdrawal excise tax
in addition to ordinary income tax.
An Education IRA (EIRA) is an IRA established to provide
funds that will allow a beneficiary to attend a program of higher
education. There is no tax deduction allowed for the contribution,
but all deposits and earnings may be withdrawn free of tax and
penalties if used to pay for the costs of higher education. Beginning
in 2002, EIRA proceeds may also be used free of tax and penalty
to pay for the qualified expenses of a kindergarten through 12th
grade education in public, private, and/or religious schools.
Beginning in 2002, allowable EIRA contributions increase to $2,000
Information has been obtained from sources believed to be reliable
however Odyssey advisors LLC does not warrant its completeness
or accuracy. Opinions constitute our judgment as of the
date of this material and are subject to change without notice.
This material is not intended as an offer or solicitation
for the purchase or sale of any financial instrument. Securities,
financial instruments or strategies mentioned herein may not be
suitable for all investors.
Things You Need to Know About Google BEFORE Bidding in Their IPO.
Natalie Pace, CEO, NataliePace.com
Google, and use their search engine many times each day. I think
having lava lamps in the reception area is both fun and festive.
I adore roller-blading, and quite imagine how much fun it would
be to beat my boss on the tarmac over lunch. So, when I learned
that Google was going to let the average Joe have a crack at their
IPO, I danced on the ceiling….
however Google's "democratic" IPO isn't really designed
for the common man, and if you're thinking you can just plunk
down a few hundred dollars in the hopes of getting a a fistful
of shares, you're mistaken. Google is likely a stock you'll want
to have in your portfolio, but only if you can buy it at the right
price. The IPO, however, is not only out-of-reach for most investors,
its design is decidedly toward the benefit of the insiders, at
reasonably high risk for those newbies hoping to profit. The consensus
among many money managers whom I consulted was that the first
day of active trading would be more watched than this year's Belmont
Stakes, with most of them buying only if the price dipped drastically.
so equal after all. If you are not already an active IPO-trading
client of Morgan Stanley & Co. Incorporated or Credit
Suisse First Boston LLC, then you're probably not going to qualify
to participate in the Google IPO. Morgan Stanley's qualifying
criteria includes having an account open for over three months
and prior participation in IPOs and/or Secondaries. A cold call
to a broker at Credit Suisse First Boston, LLC indicated that
the interest in the Google IPO was so strong that they were
only taking new accounts with a million dollar deposit.
lot of selling going on. Current stockholders, including
Google's founders and management team, are selling, not buying,
Frenzy. As the founders say in their S-1 filing, "It
is very likely that the number of shares offered by the selling
stockholders will increase if the price range increases… This
could result in downward pressure on the price."
According to the S-1 filing, Google "can increase the size
of their offering in response to investor demand."
Users Need Only Apply. Most everything related to the Dutch
auction will be handled by electronic delivery. If you do not
consent to electronic delivery, you won't be able to submit
a bid or participate in the offering. Good news for trees. Bad
news for snail mail aficionados and fax lovers.
White and Blue. Individual investors located outside the
U.S. should not expect to be eligible to participate. So, sorry
to our Canadian NataliePace.com members!
- No Dividends.
Google writes, "We currently intend to retain any future
earnings and do not expect to pay any dividends in the foreseeable
so democratic after all. Your shareholder vote will be worth
1/10 of the vote of the insiders at the corporation.
a great search engine. They figured out a great system for effective
Internet advertising. The corporation is doing a lot of things
right by Internet users and, it would appear, by their staff.
It is yet to be determined whether the Google management team
can effectively balance their business needs with the best interests
of shareholders. Certainly, if you're in a position to participate
in the Google IPO, there is little downside in making a reasonable,
informed bid. However, if you're locked out of the process, due
to one or more of the reasons listed above, it may, in fact, work
to your favor.
information on how to determine a reasonable bid, the current
valuation of Google ($30 billion) and more, go to the feature
articles in NataliePace.com issues 48 and 49.
Mid-Summer Report Card.
list of the companies we've featured since January 2003, along
with their performance. Yes, we're a little proud.
to note that the 4th quarter, the Santa Rally, is traditionally
where the stock market sees most of its gains. Many of the stocks
we've featured recently, particularly Opsware, News Corp., Sony
and Rio Tinto, are poised to perform much better by the end of
the year. Biotechnology companies, like Medicis and Genentech,
should continue to benefit from an aging U.S. population (almost
1/3 of the U.S. Population consists of retiring Baby Boomers),
a fast-track friendly FDA and break-through treatments in cancer
(Company of the Year 2003)
South (owns Cingular)
Health Institute (NHI) REIT
(TASR), NataliePace.com's Company of the Year in 2003 has split three
times since January 2003. If you bought 250 shares on 1.1.03,
you would now own 2,000.
and Medicis have each split once. If you bought 250 shares, you
now own 500 shares.
Rich AND Save the World With Socially and Environmentally Responsible
an anti-tobacco educator, was appalled when she learned that every
one of her mutual funds held large investments in tobacco stocks.
you know it or not, your money is talking. The question is: Do
you agree with what it is saying?
Gregory Wendt, CFP email@example.com
or (310)227-8050 x122.
an anti-tobacco educator for colleges across California, is devoted
to her job and has a talent for helping young people recognize
the perils of smoking. That's why she was appalled when she learned
that every one of her mutual funds held large investments in tobacco
stocks. For Terrie, the revelation that her investment portfolio
conflicted with her personal values is what sent her to my office
and marked the beginning of her interest and inquiry in socially
and environmentally responsible investing.
isn't alone. The trend toward socially responsible investing (SRI)
began in the 1960s, as people began to shun companies like Dow
Chemical that profited from the manufacture of Napalm for
the Vietnam War. The movement to sell off "sin stocks"
gained momentum in the 1980s. A growing number of investors found
it unconscionable to hold stocks in companies that did business
in apartheid South Africa. Success with helping to end apartheid
inspired socially responsible investors to turn their attention
to other issues, such as protecting the environment and promoting
fair labor practices.
institutional investor on the East Coast, alone, leverages $90
billion in assets to make better corporate citizens out of companies
as large and powerful as Exxon Mobil, Ford and General
Electric. Today, one out of every eight dollars under professional
management in the U.S. is part of a values-based portfolio. Last
year, the Social Investment Forum reported that socially
responsible investments in the U.S. totaled more than $2.1 trillion.
That's more than one out of every nine dollars invested
in the stock market!
My Money "Have a Heart" and Make a Competitive
short - investors have discovered that one can ‘do good and do
well' at the same time. Investing in companies with good
social and environmental track records is completely in alignment
with seeking solid financial performance. Socially
responsible funds are definitely competitive with the broad universe
of mutual funds and, in many instances, have done better than
other types of funds.
A recent Social
Investment Forum study found that 16 of 21 screened funds
with $100 million or more in assets achieved the highest rankings
for performance from Morningstar or Lipper for the
single and three-year periods ending June 30, 2003. The Domini
Social Equity Index (which is the SRI equivalent of the S&P
500) also shows that what is good for the planet can also be good
for the pocketbook. The Domini Index outperformed the S&P
500 in 2003, and for the past 10 years on a total returns basis.
Can I Become A Socially Responsible Investor?
minded investors align their portfolios with their values by selecting
or excluding companies based on their values. For my client Terrie,
her strong commitment to public health made her choice clear:
dump all of her tobacco holdings. This is known as screening.
consider a host of values when determining what companies to invest
in - and what companies to avoid. Avoidance Screening is
an option when a company or industry falls short of an investor's
values. Socially responsible investors consider a wide range of
factors. For example, many responsible investors shun companies
that manufacture or sell tobacco, alcohol, firearms, weapons or
energy from nuclear power plants. Responsible investors might
also exclude companies for any number of other reasons, such as
companies with poor records of diversity in the workplace, shoddy
environmental records or firms who do business with oppressive
regimes, such as Burma.
Screening is the opposite approach. Responsible investors
might seek out innovative companies that support their values
and principles. Sometimes this takes the form of investing in
companies in cutting-edge industries such as alternative energy
or companies that market organic foods. It also takes the form
of investing in companies or agencies that demonstrate a high
level of commitment to the environment, workers' rights or minority
Whether you know it or not, your money is talking. The
question is: Do you agree with what it is saying?
and critical component of socially responsible investing, is shareholder
activism. This is very important because it has a direct impact
on how companies are managed. I always remind my clients that
this is where the "rubber meets the road." Shareholder
activism is promoting powerful changes in corporate America.
This is accomplished via proxy voting, shareholder resolutions
and dialogue with management. Through the proxy voting process,
the shares you own in a company, either directly or through a
mutual fund, have a say on a wide range of issues as to how a
company is managed.
there are hundreds of shareholder resolutions on issues as diverse
as: animal testing, drilling in the arctic, non-discrimination
policies, sweatshop labor, genetic engineering and human rights.
varied approaches, values based investors are changing the way
many firms do business. This is promoting progressive changes
here in the U.S. and around the world. Success with one corporation
can often spur change across an entire industry. For instance,
in 1999 shareholder activists were a critical part in pressuring
Home Depot to stop purchasing wood harvested in endangered
old-growth forests. Just prior to the company's annual meeting
where this decision would be decided, 12 percent of Home Depot
shareholders stated loudly and clearly that they wanted the selling
of such wood stopped. Not only did Home Depot amend its policies
to phase out the sale of such wood, but within a year so did Menards,
Home Base, Wickes Lumber, Lowe's and Lanoga.
for the community
investors want the savings they hold outside the stock market
to work for their values as well. Community development investing
is when investors make loans to communities in need
to help create low-income housing, shelters for battered women,
and childcare centers. From opening a checking account at a community
development bank to investing in a mutual fund that places assets
in hard-hit inner city communities, your wealth can be part the
nearly $7.6 billion of assets in the U.S. that are directly involved
in transforming the lives of people in need.
her money "talks" as loudly as she does
client of mine, Mary, has found the whole process of Socially
Responsible Investing and shareholder activism to be very attractive.
She is a successful television actress who is very active in supporting
environmental groups and progressive causes. For years her advisor
was a family stockbroker at a major brokerage firm. On a number
of occasions, she raised her concerns about companies in her portfolio
that depleted natural resources and befouled the earth.
her advisor to find investments and mutual funds that were socially
and environmentally responsible. Throughout the relationship,
the broker derided her concerns. He always dismissed such requests
and advised her that socially responsible investment strategies
were inferior. Eventually Mary was fed up and finally embarked
upon finding a new advisor. Mary came to me seeking someone who
would not only listen to her concerns, but who could also help
her to earn competitive returns on her portfolio. Now that her
money is ‘speaking as loudly' to promote her values as she is,
Mary is very happy with the changes that she has made.
she is pleased that her wealth is not only growing, but it is
also helping to fuel positive change in corporate America. Her
investments, she says, are now safeguarding her family's welfare
- and the planet's.
more about Greg Wendt, CFP, and his services or for more information
about Socially Responsible Investing go to the websiteWWW.GREGWENDT.COM
You can reach Greg via email at firstname.lastname@example.org
or by phone at (310)227-8050 x122.
Self-Care in the Work Place can Inspire and Rejuvenate You and
Rebecca Bowler, founder of Rebecca Bowler Healing Arts RBHealingArts@nyc.rr.com
the face of today's changing business paradigm--outsourcing, economic
instability and the new capitalism emerging from the Sarbanes-Oxley
compliance protocol--executives and business owners are exquisitely
placed to effect deep-seeded change. As the founder of my own
small business, Rebecca Bowler Healing Arts, I was asked
to report my impressions of the Forbes 6th Annual
Executive Women's Forum for NataliePace.com. I entered the Forbes event
at the Plaza Hotel in New York City in time for corporate speed
dating. This one-to-one networking revealed a common voice, "I
love my job. But, I'm overworked and overwhelmed. I'm looking
for like-minded individuals to affect the kind of change I believe
can happen. In the meantime, I'm wondering what to do with the
rest of my life." Far from an expression of powerlessness,
this sentiment reflects the fragmentation many people experience
when their instinctive and emotional capacity is underutilized
and self-care is absent.
We lack direction
when going against the grain of our nature. Our lives lose integrity
when we are not fully challenged, expressing creatively, and maintaining
a balance between the social, emotional, mental, spiritual and
physical aspects of our existence. Purpose is naturally called
into question when such divisions occur. Who we are becomes divergent
from what we do and life lacks meaning. We suffer, and so does
our professional influence.
"Food for Thought"
- How can
we facilitate the integration of our personal and professional
lives? Are we able to reframe our experience by making new choices
so that what was once compartmentalized becomes our unified
base of strength?
- What are
our best means for resetting the tone at the top? How do we
restructure our office cultural climate
to be one that reflects both our personal and our company's
ethics and values?
- How do
we integrate emotional intelligence into business?
integrity, determination, business savvy, and ethics are being
modeled, are we sufficiently attracting our children to leadership
- Are we
demonstrating healthy role modeling and mentoring?
- How do
we better impart the importance of math and science in our educational
infrastructure so that future generations are capable of producing
the engineering and technology we currently outsource?
Free Massage! Pamper and inspire yourself and your staff
I have been in practice for ten years as a body
worker. I am frequently brought in to do corporate chair massage.
In that capacity, I have created, nurtured and witnessed the increase
in both morale and productivity, which inevitably occurs when
employees are appreciated for their efforts. This phenomenon goes
beyond the stress reduction a 20-minute chair massage provides.
Choosing to make the time for self-care as part of the office
environment instills respect, boundaries and value systems, which
are critical to, and supportive of, both a healthy work environment
and honest business practices. Of course, if you're at the top
and not practicing on-going self-care, those under you will experience
similar burnout. Expecting optimal employee performance in an
office void of support is clearly futile.
what gets rewarded in your office setting and re-evaluate your
culture from that point of view. What actions take you out of
feeling overwhelmed and into more continuity with your passions?
Prioritize the creation of an aesthetically pleasing environment
that includes massage therapy, in-office yoga and flex-time. When
balance and right energy is established in the environment, stress
is mitigated, communication is fostered at a higher level and
progress happens more fluidly. Improve morale in the office by
setting up healthy support systems. These will become a win/win
for everyone participating. Specifically encourage participation
from your employees who are less likely to offer unsolicited opinions.
Then measure your success. Are these tools working for you in
your immediate area of influence? Is the impact of your new best
practices reflected in both your bottom line and in a visibly
thriving office community? Does what you manifest inspire a new
generation to step into your shoes?
self-care as a personal paradigm can translate into the corporate
value systems. An ethical, sustainable culture, mission and goal
are the results. Therefore, be passionate about who you are and
what you do. Dare to be authentically yourself in leadership.
Build your communities from the inside out, starting with the
best use of your personal power for self-care. Confidence, flexibility
and healthy practices reap the biggest rewards- tangible and intangible.
Transmit what you cultivate. Watch the trickle down and know that
you have made a difference.
to freelance writing, Rebecca Bowler owns and operates Rebecca
Bowler Healing Arts, an Esalen-certified massage therapy practice
thriving in NY, LA, and Minneapolis. Rebecca can be reached at
212-946-1732 or RBHealingArts@nyc.rr.com
President Clinton to Larry Kudlow, on Iraq, rising interest rates,
real estate and more…
important thing about Iraq is that we all have a big interest
in seeing Iraq succeed as an independent, stable government. I
think it might. I think that the chances are better than 50/50
that it will work over time, but we're a long way from there."
Bill Clinton, in his interview with Katie Couric, 6.24.04
being controlled by too few, too powerful, corporations:
think of media as too consolidated. The market will take care
of these problems. A lof of these FCC rules are antiquated, and
they need to go away. You have hundreds of dials and channels
to choose from. They are owned by the same person doing utterly
different things." Dennis Kneale, Forbes
Internet is the future. Everyone is going to do television on
the Internet. This [media consolidation concern] is election year
grandstanding." Larry Kudlow
rates first rise, everyone accelerates their durable goods purchases,
including homes." Larry Kudlow…
be the last gasp before a [real estate] bubble burst. Everyone
is up profit-wise, so they are not going to feel it." Dennis
sell on rising interest rates: Trucks and truck parts, appliances,
home builders, REITs. "Savings and Loan stocks should be
the first withdrawal you make in your portfolio. They historically
sink after a series of interest rate hikes… REITs dropped more
than 7% this quarter, and do not fare well in rising interest
that Fed funds can't be 2% in three months… it should be at least
that. Whether or not it can be three or four, if the stock market
can handle higher rates, the Feds will bring it up… Oil is inflationary
and reduces spending power." Keith Anderson, Managing Director,
Black Rock Financial Management, one of the biggest bond managers
in the country
getting the hell out of Dodge City, USA, and reinvesting in London
and Frankfurt bonds. Construct an A B T portfolio -- Anything
But Treasuries." Bill Gross, Pimco Bonds' Investment Outlook,
discussing bond strategy in a rising interest rate environment,
where 2% is the expected gain for the next 4-5 years...
returns] is a pretty good approximation for what an investor in
U.S. bonds should earn over the next 4-5 years." Bill Gross,
Pimco Bonds' Investment Outlook
you cannot afford the home with fixed rate debt and you can only
afford it by using adjustable rate mortgages, then perhaps you
should be buying a less expensive property or not be buying at
all." Stefan Whitwell, read his article
in this ezine
rising interest rate environment lighten up on your bond portfolios…
Think about getting fixed rate debt on your home and other real
estate investments." Stefan Whitwell, read his article in
Networks is late in filing their financial statements." Jane
Wells, Biz Brief
Networks) is not concerned about not having accounting statements…
They'll get their accounting issues sorted out. I'd rather go
with Lucent. The expectations are so low." James Cramer,
is a wasting asset. Mr. Armstrong paid too much for cable, paid
too much for wireless." James Cramer, 6.17.2004
baffled at how [AT&T] is going to survive. I think it's dead
in the water. The stock is falling like a stone." Larry Kudlow,
semiconductor sector rates grow at 5% times GDP. 5% GDP equals
25% growth for semiconductor. The seasonality is in our favor.
In July, we start chip demand, with back-to-school buying for
PCs and cell phones. The stocks are a very good value again. P/Es
are low, between 10 and 16 in the top five companies. We are in
a boom. Technology is leading the way." Tom Kurlak, Former
Merrill Lynch semiconductor analyst, speaking on Kudlow and Cramer,
on June 17, 2004
missed this group in the lows of 2002, this is the 2nd
best buying opportunity in the cycle. Some of them have come off.
Intel. National Semiconductor. Focus on the leaders… Teradyne
(TER) sells for 10x next year's earnings. They are number one
in testing semiconductors. Every chip has to be tested."
Tom Kurlak, Former Merrill Lynch semiconductor analyst, speaking
on Kudlow and Cramer, on June 17, 2004
revenue is going to be unwinding. Revenue will reaccelerate up
to 9-13%. That will become clearer as they enter into their 2005
and 2006 year." Robert Simpson, Banc of America Securities,
appearing on Kudlow and Cramer, 6.17.2004
software companies generate 1-1.5% in interest income. Microsoft
generates $900 million on their cash balances… They want to make
sure that they maintain the cash balance. They can do a lot of
things with that cash horde, rather than give it back. I talk
to clients and tell them about 5% interest rate scenario…. I'm
really in favor of the dividend." Robert Simpson, Banc of
America Securities, appearing on Kudlow and Cramer, 6.17.2004
you look at the PC demand, our analysts are forecasting 11% growth.
The PC growth assumption number is about 6%. I bumped it up to
7.5%. We're getting good feedback from the CIO environment."
Robert Simpson, Banc of America Securities, appearing on Kudlow
and Cramer, 6.17.2004, explaining why Banc of America bumped Microsoft
up to outperform.
over 36 million copies [of the Sims] worldwide. We're showing
the sequel, Sims 2. We've got a new version of Madden Football
this year. Harry Potter is shipping." Chip Lange, VP, Entertainment
Arts is an UP stock" according to Kudlow and Cramer, 5.12.2004
colon and lung cancer, the last two years have been an explosion
in therapy. Two cancers that need more progress are brain cancer
and pancreatic cancer. We're working hard. A very early, but promising
study was reported using Avastin with chemotherapy in pancreatic
cancer… What this could mean for patients is a substantially better
outcome than we've seen with chemotherapy alone. We're in the
final phase of testing… Before cancer is cured, the first thing
that will happen is that cancer will become a chronic disease.
Over the next 5-10 years, some of the most commonly occurring
cancers will become amenable to therapy." Dr. Susan Desmond-Hellmann,
CMO, Genentech (NYSE: DNA)
a Romantic Rock n Roll Weekend in Woodstock, with Country French
Woodstock at the Bed and Biscuit. Hidden in the evergreens of
the Catskills, this historic B&B offers psychedelic serenity
(or at least the memory of it) with complete privacy. Located
on 27 acres, just two miles from the village of Woodstock, the
Bed and Biscuit is convenient to all summer and winter Catskills
attractions. Spend a secluded evening by the fireplace, soak by
candlelight in your pedestal tub, unravel the mysteries of mathematical
chaos theory beneath the disinterested stars or jam on your guitar
in the same barn that Dylan wrote songs in. In the morning, sing
out for delivery of a full breakfast of locally baked breads,
fresh eggs and seasonal organic fruits(when available). Fully
furnished cottage includes breakfast. Try country French cuisine
at its finest at Yvonne's, just down the road.
Country French cuisine at it's most charming, served by none other
than Yvonne herself. If she's not out picking dandelion
greens, watercress or milk thistle for her salads, she's probably
hunting wild boar for one of her most divine pates. The
crispy duck is the best in the region, and it ought to be. She's
been perfecting French cuisine for almost 35 years.
Rt. 28 just west of Phoenicia (25 min. from the Bed and
Forbes' Investing Seminar this month in Seattle. Find out about
Money Make-Overs, Networking Luncheons, Conferences, Galas, Chats,
Teleclasses and other special opportunities! Check out what's
happening online at the Calendar section of the web site.
FREE Private Investor Seminar. Very limited registration.
Fairmont Olympic Seattle Hotel, Seattle, Washington. Although
the economy is improving, the markets are volatile. Navigating
asset allocation is more challenging than ever. The Forbes Investor
Seminars feature leading thinkers in the areas of capital markets,
economics, retirement planning, and more. Known for lively discussion
and debate, these seminars give investors the information and
strategies they need to reach their financial goals. Go to NataliePace.com's
Calendar section for a direct link to register.
Apprentice" star, Carolyn Kepcher, (the beautiful, brainy
blonde who sat to the left of Donald Trump in the series) at the
Women's Leadership Exchange's Conference in Long Beach, California,
on August 3. 2004. Go to NataliePace.com's Calendar section for a direct
Anonymous Chat with NataliePace.com founder and CEO, Natalie Pace.
Ask your most pressing, simple, complicated and/or annoying questions
of the respected financial commentator for Fox News and Forbes.com.
With rising interest rates and inflation on the near horizon,
it is more critical than ever to get the news, information and
education you need to make more informed investment choices. Members
Only. July 14, 2004 at 8:45 a.m. PST and August 4, 2004 at 5:00
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
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 NataliePace.com philosophy centers around five principles:
Ongoing Education, Monthly Commitment, Diversified Portfolio,
Ethical Business Practices, Pooled Resources.
For more information on NataliePace.com contact us at info@NataliePace.com
NataliePace.com is NOT a stock brokerage service, and does not operate
or act as one.