Hybrids: Car of the Stars, But Should You Own the Stock?

By Natalie Pace, CEO, NataliePace.com.

Step Aside 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 EPA’s Top Green Cars list! Buy the cars, but should you own the stock? If you don’t remember the Chrysler crisis of 1979 or know the name Lee Iacocca, it will pay for you to read on...

Toyota Prius, Motor Trend's 2004 Car of the Year $20,810 MSRP

es, 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.

Just what 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."

While the 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.

You might 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.

Toyota is 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 here.

High fuel prices and celebrity buyers, like Cameron Diaz, Leonardo di Caprio and Larry David, are keeping hybrids rich in headlines, but hybrids are notÑyet--capturing market shareÉ 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.

Meanwhile, hydrogen fuel cells are the focus of new research and development.
Honda 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.

Investing in the Bottom Line: Short Term, Long Term or Avoid the Sector?
Analysts 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 and minivans.

However, Detroit's 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.

Short Term Investing:
This 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.

Exuberant 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.

Long Term:
In 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!

The Bottom Line: Good-bye SUVs!!
By 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 sector.

Full Disclosure: Natalie Wynne Pace does not own shares or positions in any of the companies mentioned in this article or the accompanying Stock Report Card.

Cashing in Before the Crunch of Inflation and Rising Interest Rates.

6 Sectors to Avoid, and 5 That Stand to Profit.

by Paul Woods, CEO, Odyssey Advisors, 310.568.4700
www.OdysseyAdvisors.com

Where to 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:

Sectors to Avoid:
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 demand.

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 service companies.

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 here.)

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.

More Than Money: True Stories of People Who Learned Life's Ultimate Lesson.

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. É

by Neil Cavuto, host of two top-rated business shows, Your World with Neil Cavuto and Cavuto on Business, both on Fox News.

Chapter One: "When Life Throws You A Curve Ball"

'm 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.

That makes 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."

Torre makes plenty of sense to his team, and to New Yorkers, and he surrounds himself with people who are much like him: diplomatic doers, not brash talkers.

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.

Like Torre, 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.

Torre and Stottlemyre proved to be powerful dynamos behind the Yankees' success and all those post-1996 division, league, and World Series championships.

As significant 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.

Torre, in 1999, and Stottlemyre, in 2000, had bigger worries than winning baseball games and titles on their minds.

They each 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."

Years before my mother was diagnosed with a brain tumor, I remember being aware that her biggest fear was getting cancer.

It wasn't so much the hopeless prospects for the disease at the time, but its debilitating final days.

For strong 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.

Heart attacks and car accidents actually take more lives, but cancer and its consequences have a singular dominance of our psyche and fears.

People who 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 over again.

As traumatizing 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 your senses.

There's an 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.

Some handle the pressure and personal issues well. Sadly, a lot of them do not.

Magnifying 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.

Unlike business 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.

My father 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.

The foregoing 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

For more information or to purchase More Than Money, by Neil Cavuto, click here:

4 Ways to Protect Yourself from Rising Interest Rates in Real Estate, Bonds, Credit Cards, Car Loans and Stocks.

"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 all." -Stefan Whitwell.

By Stefan Whitwell, CFA, Managing Partner, Tierra Capital, L.P. http://www.tierracapital.net

One of 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 Ôthing,' 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.

Stefan Whitwell

nterest, 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.

Whitwell Rule #1: Factor in interest rates for car leases, loans and credit cardsÉ
Last 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.

Me: "Hi, yes, great, thank you. Do you have any lease specials?"

Him: "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?"

Me: "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?"

Him: "There is no interest. We use a Ômoney factor,' which is .0002."

Me: "What [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]

Him: "A money factor is the thing we use to calculate the monthly payments."

Me: "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."

Him: "Like I told you, in the auto business we don't use interest rates, we use money factors. It -"

Me: [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 money factors."

Him: "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 for you.

Me: "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.

Whitwell 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.

Mortgage and credit card interest rates are going upÉ
The 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 rate liabilities.

The ten-year 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.

So what should you do? Whitwell rule #3: In a rising interest rate environment lighten up on your bond portfolios.
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.

Whitwell 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 all.

There are 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.

What about stock investments?
In 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.

Bottom line, 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!

Buy Your New Home in Fall, and Save Thousands of Dollars.

Investments, 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.

eath, 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 overnight.

It's almost 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.

America's 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.

Waiting until 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.

Q&A with Dr. Richard Sandor, the Chairman and founder of the Chicago Climate Exchange.

By Natalie Pace, CEO, NataliePace.com

A reprint from NataliePace.com, issue 31.

Dr. Richard Sandor, Chairman and Founder of the Chicago Climate Exchange www.ChicagoClimateX.com

Dr. Richard 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.

Our world 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.

n 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 happenÉ The polar caps are meltingÉ 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."

FOREST COVER, STATE OF PARANA, BRAZIL

The United 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?

Think that 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.

(WIN Note: 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.)

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Natalie PaceÑAmericans 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?

Sandor-- 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 participating in.

Are the 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 reasons?

Sandor--I 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.

Some people 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:

A. Increased shareholder value and demand from stakeholders;
B. Threat to shareholder values; and
C. The desire to be on the right side of an issue with potential global implications.

Your company 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?

Sandor---A 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 level systematically.

What lessons 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?

Sandor--We 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.

Just how 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 for reforestation?

The other 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 quality.

Describe 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.

(WIN 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 projectsÉand start the ball rolling on market-based solutions to global warming.")

The fifteen 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?

Again the 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.

Julie Deardorff 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 communities?

It's called 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.

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If you 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!

IRAs: Your Tax Haven When Bonds are Shooting Blanks.

With experts warning against bonds, where can you put your money? Which IRA is right for you, and how much can you deposit each year?

By Yong Xu , Junior Portfolio Manager, and Meri Anne Beck-Woods, Chairman & CFO , Odyssey Advisors LLC  310-568-4700  www.OdysseyAdvisors.com

onds 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.

"Just 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

"Investors 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

To 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.

What is an IRA, anyhow, and how does the Roth IRA differ from the traditional IRA?
An 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
The contribution 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 Contributions
For 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 jointly).

3.  Minimum Distribution Rule - Forced vs. Individual Choice
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 your heirs.

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 family members.

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 started.

1.      Select a Provider:
Banks 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 firm.
Insurance 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.  
Mutual 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.  
Many 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.

Research Links:
IRS document related to IRA:  
http://www.irs.gov/pub/irs-pdf/p590.pdf

IRA provider comparison table:
http://www.fool.com/ira/opening.htm?ref=mp

Other Resources:  
http://fairmark.com/rothira/howto.htm
http://www.fool.com/ira/ira.htm

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 per year.

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.  

Eight Things You Need to Know About Google BEFORE Bidding in Their IPO.

By Natalie Pace, CEO, NataliePace.com

I love 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 ceilingÉ.

nfortunately, 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.

1. Not 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.
2. Whole lot of selling going on. Current stockholders, including Google's founders and management team, are selling, not buying, shares.
3. Feeding 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 increasesÉ This could result in downward pressure on the price."
4. Dilution. According to the S-1 filing, Google "can increase the size of their offering in response to investor demand."
5. Tech-friendly 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.
6. Red, 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!
7. No Dividends. Google writes, "We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future."
8. Not so democratic after all. Your shareholder vote will be worth 1/10 of the vote of the insiders at the corporation.

Google is 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.

For more 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.

NataliePace.com's 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.

It's important to note that the 4^th 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 and anti-aging.

*Taser International (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.

**Genentech and Medicis have each split once. If you bought 250 shares, you now own 500 shares.

Get Rich AND Save the World With Socially and Environmentally Responsible Investing …

Terrie, an anti-tobacco educator, was appalled when she learned that every one of her mutual funds held large investments in tobacco stocks. Whether you know it or not, your money is talking. The question is: Do you agree with what it is saying?

By Gregory Wendt, CFP greg@gregwendt.com or (310)227-8050 x122.

Terrie, 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.

errie 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.

One faith-based 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!

Can My Money "Have a Heart" and Make a Competitive Return
In short - investors have discovered that one can Ôdo 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.

How Can I Become A Socially Responsible Investor?
Responsible 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.

Investors 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.

Affirmative 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 communities.

A third, 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.

Every year 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.

Through these 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.

Caring for the community
Many 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.

Now her money "talks" as loudly as she does
Another 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.

Mary encouraged 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 Ôspeaking as loudly' to promote her values as she is, Mary is very happy with the changes that she has made.

Mary says 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.

To learn 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 greg@gregwendt.com or by phone at (310)227-8050 x122.

Guilt-Free Massage.

How 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

n 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 6^th 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.

Soul "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?
• Assuming integrity, determination, business savvy, and ethics are being modeled, are we sufficiently attracting our children to leadership positions?
• 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?

Guilt 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.

Ask yourself 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?

Implementing 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.

In addition 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

Notable Quotes:

From President Clinton to Larry Kudlow, on Iraq, rising interest rates, real estate and moreÉ

On Iraq:
"The most 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

On Media being controlled by too few, too powerful, corporations:
"I don't 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

"The Internet is the future. Everyone is going to do television on the Internet. This [media consolidation concern] is election year grandstanding." Larry Kudlow

On Rising Interest Rates:
"When rates first rise, everyone accelerates their durable goods purchases, including homes." Larry KudlowÉ

"It could be the last gasp before a [real estate] bubble burst. Everyone is up profit-wise, so they are not going to feel it." Dennis Kneale

Sectors to 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 hikesÉ REITs dropped more than 7% this quarter, and do not fare well in rising interest rates." CNBC

"To think that Fed funds can't be 2% in three monthsÉ 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 upÉ Oil is inflationary and reduces spending power." Keith Anderson, Managing Director, Black Rock Financial Management, one of the biggest bond managers in the country

"I recommend 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...

"[2% 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

"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 all." Stefan Whitwell, read his article in this ezine

"In a rising interest rate environment lighten up on your bond portfoliosÉ Think about getting fixed rate debt on your home and other real estate investments." Stefan Whitwell, read his article in this ezine

Telecommunications:
"Nortel Networks is late in filing their financial statements." Jane Wells, Biz Brief

"NT (Nortel Networks) is not concerned about not having accounting statementsÉ They'll get their accounting issues sorted out. I'd rather go with Lucent. The expectations are so low." James Cramer, 6.17.2004

"AT&T is a wasting asset. Mr. Armstrong paid too much for cable, paid too much for wireless." James Cramer, 6.17.2004

"I'm 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, 6.17.2004

Semiconductors:
"The 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

"If you missed this group in the lows of 2002, this is the 2^nd best buying opportunity in the cycle. Some of them have come off. Intel. National Semiconductor. Focus on the leadersÉ 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

Technology:
"Microsoft's 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

"Most software companies generate 1-1.5% in interest income. Microsoft generates $900 million on their cash balancesÉ 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 scenarioÉ. I'm really in favor of the dividend." Robert Simpson, Banc of America Securities, appearing on Kudlow and Cramer, 6.17.2004

"If 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.

"We sold 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 (ERTS)

"Electronic Arts is an UP stock" according to Kudlow and Cramer, 5.12.2004

Biotechnology
"In 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 cancerÉ 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 testingÉ 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)

Play Money:

Try a Romantic Rock n Roll Weekend in Woodstock, with Country French CuisineÉ

elive 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.

http://www.bedandbiscuitbb.com

Yvonne's
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.

Yvonne's
845.688.7340
Rt. 28 just west of Phoenicia  (25 min. from the Bed and Biscuit)

Calendar:

Don't Miss 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.

Forbes: 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.

Meet "The 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 link.

An Intimate, 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 p.m. PST.

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 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

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