Vol.1 Issue 53 October 1st. , 2004
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of the Month: "Overall,
this is a time for caution, a return to fundamentals, and perhaps
a more conservative approach to home buying. It appears that
the market has fully adjusted to lowered interest rates and
that sustained price increases in the future are likely to be
more dependent on job and income growth.”
Steve Dietrich, president
, a Southern California based real estate consulting and development
firm, and a Guest Lecturer at the Anderson Graduate School of
Real Estate in Today’s Market: by Steve Dietrich,
president, FRG, and a guest lecturer at the Anderson
Graduate School of Business, UCLA.
Your Dream: Where the Money Trees Grow and Why You
Should Stop Chasing Venture Capital NOW. Success Secrets
of CEOs features an exclusive Q&A with Beth Polish,
founding CFO, iVillage, and Patty DeDominic, President
Emeritus, NAWBO by Natalie Pace, CEO, NataliePace.com.
YOUR DREAM BUSINESS: a Nine Point Checklist.
WEALTHY: Your chance to have four seasoned financial
consultants give you a personal money makeover. In this
issue, a stay-at-home mom navigates her way through
one of the most difficult emotional and financial changes
of her life—divorce.
Bad Hair Days and Inflation Have in Common by Natalie
Pace, CEO, NataliePace.com.
Report Card: Airlines in Crisis With Delta On the
Ropes, United in bankruptcy and US Airways pending liquidation,
will Jet Blue and Southwest’s share prices soar?
By Natalie Pace, CEO, NataliePace.com.
on Inflation and Social Security, and other Notable
on Sale!! Create Your Own Mutual Fund with NataliePace.com
Stock Picks by Natalie Pace, CEO, NataliePace.com.
you Playing BLACK JACK With Your Retirement? How
much of your nest egg should you have invested in the
Questions to Ask Your Broker Before You Hand Over Your
Money… by Stefan Whitwell.
Corporations More Powerful than Governments?How
you, the investor and consumer, can change the course
of big business. By Marilyn Tam, founder & executive
director, Us Foundation; Former President, Reebok Apparel.
Tips for Taking Charge of Your Financial Destiny
By Christopher Howard.
Funds Exposed by Stefan Whitwell, CFA, Managing
Partner, Tierra Capital, L.P.
Real Estate in Today’s Market:
Steve Dietrich, president, FRG, and a guest lecturer at the Anderson
Graduate School of Business, UCLA.
Real Estate too High to Buy?
the question most frequently asked of us in the real estate industry
is, "What is happening to home prices; should I buy now?"
In many areas, price increases over the past few years have exceeded
10-20%. In a number of areas increases of more than 30% have occurred.
While the recent widespread surge in home prices has been spectacular,
there is no reason to believe that this sector has repealed the
fundamental laws of economics.
prices reflect the instant dynamic equilibrium point between supply
and demand in particular neighborhoods, cities, and regions. The
demand for homes comes from population and jobs or wealth. On
a national or regional scale, raw demographic data indicates an
almost insatiable demand for housing. However, in the absence
of accumulated wealth, housing affordability depends on income,
interest rates, and savings. The key to understanding the recent
increase in consumer home buying power is knowing that it has
come not from growth in personal income and traditional savings,
but rather from falling interest rates and equity from the increase
in home values.
low interest rates of the past few years have contributed significantly
to the surge in home prices. In addition, the increasing popularity
of variable rate mortgages has further increased the buying power
of home purchasers. Data Quick Real Estate shows a very significant
increase in the use of adjustable rate mortgages in the California
market, especially in those areas with the highest prices and
the greatest price increases. By November of 2003, approximately
65% of the homebuyers in the San Francisco Bay Area were using
adjustable rate mortgages, while in the central valley, mountain,
and rural areas of the state, the percentage was less than 40%.
One possible interpretation of this data is that in the areas
experiencing the greatest price increases, buyers are forced to
use adjustable rate mortgages in order to qualify for homes.
Any increase in interest rates affects the loan amounts available
to both adjustable rate and fixed rate borrowers; however, the
most significant reduction may be in the loans available to variable
rate borrowers. This would indicate that some of California's
highest priced communities are the most susceptible to the impact
of any change in interest rates.
The huge amount
of treasury debt held by offshore investors is a threat to the
government's ability to manage domestic interest rates as a part
of economic policy. In addition, efforts to maintain control over
inflation are likely to result in increased interest rates. Thus,
there is a significant probability that rising interest rates
will take a real bite out of the purchasing power of the typical
threatening the continuation of price increases is the relatively
low level of growth in personal income. If interest rates
rise without a corresponding increase in personal income, the
purchasing power of potential buyers will decrease, with significant
impacts on both demand and prices.
prices of closed escrows remain at record highs in most California
communities, some very significant changes have occurred over
the past few months. In July 2004, the number of homes sold declined
in 4 out of 6 Southern California counties and by more than 10%
in 2 of the 7. Discussions with brokers have indicated that in
many markets the number of prospective buyers has decreased significantly.
Although prices remain strong in many areas, it is doubtful that
this will continue if buyer interest declines.
In a classic
economic model, a decline in unit sales would logically cause
most producers to begin looking at a curtailment of production.
However, home production in highly regulated areas is a multi-year
process in which huge investments are made prior to the commencement
of construction. Therefore, in the face of an impending slowdown,
there may be a strong incentive for builders to actually increase
production in the hope of selling before anticipated price reductions
or extended sales periods occur.
many respects, the classic recommendations concerning home purchasing,
especially for young professionals and female entrepreneurs re-entering
the market, remain unchanged:
Lifestyle First—Perhaps the single most important step (and
the most frequently omitted) in the purchasing process is a
clear identification of both financial and personal goals and
resources. For most individuals or families, their home purchase
is the largest single item purchase. It may define, to a significant
extent, the buyer's lifestyle, opportunities, and relationships.
Resources, flexibility, personal skills and desires, risk profile,
schools, commute times, space requirements, and expected holding
period are all key considerations. A careful goal definition
thus goes far beyond just looking at the real estate involved.
the Research—Employ the full range of your business and
management skills. I am amazed at the number of MBA's who would
not let their company select a new copier without a spreadsheet
analysis and yet who venture into the home buying market armed
only with confidence, lust, and a hot latte.
of Your Investment—Understand that real estate is generally
illiquid in the absence of an overheated market such as we have
today. Homes, like virtually all other forms of real estate,
exist at a fixed location and, once constructed, provide a 40-60
year supply of "product," useable only at that location.
Years ago when the mills left New England, and more recently
when the high tech industry abandoned Colorado Springs, the
homes built to support the industries remained and the market
location, location!—The economic and social future of the
communities in which you are interested is important. In the
absence of rapid price increases, the fundamental drivers of
future value will be more important - area economics and demographics,
quality of life, schools, and safety. Many of the larger cities
will be stressed by an increasing demand for services without
a corresponding increase in revenues.
of the most important factors in successful real estate investing
is preserving the ability to sell at a time of your choosing.
Your long-term profit may be dependent upon your ability to
select the time at which you sell the home rather than being
driven to sell for financial or family requirements.
sure you can afford it!—What are the financial resources
which you want to allocate to your home and what home price
will these support under various financing alternatives? What
is the best form of financing for your individual situation?
the interest rate—Variable rate or interest-only loans are
popular with many real estate professionals. These generally
allow the buyer to purchase a more expensive home, frequently
with a smaller down payment. However, they do subject the buyer
who does not intend to sell in a few years to an increased
risk of future interest rate increases. A 15 or 30 year
fixed rate loan may be more appropriate for some buyers.
While the payments on a 15 -year loan will be greater, the interest
rate will be about .50% less. Assuming a sale in 5 years, the
IRR on the additional payments is about 12%, not a bad rate
of return on what is hopefully a very low risk investment.
Slow Down—Overall, this is a time for caution, a return
to fundamentals, and perhaps a more conservative approach to
home buying. It appears that the market has fully adjusted to
lowered interest rates and that sustained price increases in
the future are likely to be more dependent on job and income
the president of FRG, a Southern California based real estate
consulting and development firm, and a Guest Lecturer at the Anderson
Graduate School of Business at UCLA, where he teaches a course
in Entrepreneurial Real Estate Development.
Pace, CEO, NataliePace.com.
the Money Trees Grow and Why You Should Stop Chasing Venture Capital
NOW. Success Secrets of CEOs features an exclusive Q&A with
Beth Polish, founding CFO, iVillage, and Patty DeDominic, President
use credit to dig yourself out of a hole. You use borrowed money
to move you from place A to B or C." Patti DeDominic
DeDominic, Founder, CEO and Chairman of PDQ Services, Inc.
Chairman, SCORE Foundation
to many dot com crash and burn cases and the most common theme
sounded is not that the Internet was not all it was cracked up
to be. Most founders and executives warn that they were hyper-focused
on chasing venture capital that never materialized. The Women's
Executive Network secured two million in corporate sponsorships,
but had to close up shop when the follow-on venture capital never
came in. Co-founder Beth Fehmel now believes that her team wasted
too much time chasing venture capital. Though Beth still loves
the basis of the business plan and swears that her co-founder
keeps the spark alive of one day reviving the business, Beth has
gone back to her day job, as a respected executive, drawing a
reliable income with benefits.
is full of entrepreneurs who have returned to their day-job—men
and women who could have been contenders, rejoining the ranks
of executives working to realize someone else's dream. And it
is not just a result of the "irrational exuberance"
of the Roaring 90s. According to the Small Business Administration,
one-third of new businesses will close within two years, and one-half
will be gone within four years. What's the biggest reason businesses
don't make it? You guessed it. They run out of money before the
revenue kicks in.
So, if you're
interested in starting your own business or expanding it out of
your garage, the first thing you need to address is getting enough
money to get you to cash positive. In theory at least, by following
the road map to the money tree, you can skirt the graveyard of
other's mistakes and become part of the successful half of our
do the money trees grow?
Photo credit: Philip Chase
If you trust
the numbers, and smart entrepreneurs do their research, you wouldn't
spend ANY time sending out
Summary to countless VC firms, unless you were Marc Andreessen
(who invented the Web browser) or a Nobel-prize winning doctor
working on the next miracle drug AND you had a personal relationship
with one of the decision-makers there.
another commonly held fantasy is that the government is an avid
supporter of entrepreneurs—particularly minority-owned businesses.
It turns out that government money, through the SBA and other
programs, also accounts for only 2% of the seed money for new
So, if start-ups
aren't getting venture capital or government funding, where does
the cash come to open the doors? Just how does a great idea get
launched and who takes the risk? You guessed it. Entrepreneurs
tap their own resources to get the business off the blueprint
and on the ground.
New Businesses Get Their Startup Capital
Inc. Magazine 10/03 by Beth Polish…
loan or funds from other government program
from supplier, customer or other business entity
bank loan or line of credit
of family or friends (other than co-founder)
founders' personal assets
At a Glance:
- 53% of
all business raise money through personal savings.
- 10% of
all companies use "Friends and Family." You'll need
agreements to memorialize the exchange. This is a critical moment.
You have other people you are responsible for.
- 7% of businesses
get bank loans and mortgages to finance the growth of company
- 6% of entrepreneurs
use personal credit cards.
- 4% take
angel financing. Angels are people who don't invest money professionally,
but they are professional in how they invest their money. Major
angel networks have grown up in Los Angeles, San Francisco,
Chicago and other U.S. cities. Angels can help businesses. They
know a lot. Be careful and meticulous with recordkeeping, however.
They understand financial statements.
- 2% of all
businesses secure venture capital funding. Entrepreneurs always
want venture capital, but very few companies fit venture capital
requirements. Most are beating their heads against a wall! Even
if you do fit the requirements, it is like the film industry:
2,000 scripts are submitted, 200 are optioned. 10-20 films get
made. Focusing here is not the best place to start off.
Now that you
know where the money tree grows, you need to know when the fruit
is ripe for picking! There are many tips for keeping your new
business flush with funds, some surprisingly simple (but KEY),
and others that are downright racy. For more information on how
to launch and succeed with your DREAM business, NataliePace.com turns
to two veteran, successful executives, Beth Polish, founding CFO,
iVillage and Patty DeDominic, President Emeritus, NAWBO.
What are some tips you can give someone who is thinking of leaving
the security of their own job and venturing into the speculative
world of entrepreneurialism?
DeDominic: Your values are very important. Your banker
or financial partner is in fact your partner. You need to be in
partnership with people whose values you can live with. I started
out working for free. Sweat equity. When the business is started
with the blood of your soul and someone wants to buy a part of
it for nothing, you say, "Go away!" They say, "55%
for a million." You say, "Forget it!" I started
one business from scratch and borrowed office space. We did $350,000
in the 2nd year, and $400,0000 in the 3rd
year. Today, in gross sales, we're doing multi millions a year
from a variety of enterprises. I have no debt today. However,
I still have a $3 million dollar line of credit.
you get the startup capital?
DeDominic: In 1981, the interest rate to take out a $50,000
mortgage on my house was 17%. I was happy to take that mortgage
at that percent. I had the choice of take the money and grow or
don't pay the money and don't grow. I also borrowed $50,000 from
my father. That was a very important loan that I took. He gave
me the retirement money that he and my mom had saved.
have really believed in the viability of the business, if you
drained your dad's nest egg. Was it all smooth sailing from there
or did you have to raise additional funds?
DeDominic: 1982 was another scary time in business. Different
banks have different tolerances for entrepreneurs. Some of them
want you and some of them don't. It's not about looking for a
bank that wants to help you. That's about as naïve as looking
for a competitor who wants to help you. Banks want to bet on winning
entrepreneurs. It's important to be able to design a plan that
shows them that they will have the opportunity to make money with
you. That's what clearly changed me from struggling to succeeding--realizing
that it is a partnership. If the bank can benefit from me, and
I can benefit from me, they'll like me.
Polish: In figuring it out, it's important to know why
you want to raise the money in the first place. I've been working
with this woman who has been struggling to a nice level. She's
not appropriate for debt financing, and is more appropriate for
equity financing. In pushing her, I said, "Why do you want
it?" She said, "I'm really tired. If I had the money,
I could hire an assistant." We've all been there. You're
working 24/7. None of the things she would use the money for would
have increased the value of the company. This was time for her
to double down personally.
wait until they desperately NEED money before looking into loans
and other debt options. When is the right time to push for a larger
line of credit?
DeDominic: It took fifteen years to get a million dollar
line of credit. It took five weeks to double that credit. It was
right after Orange County filed bankruptcy. If Los Angeles filed
for bankruptcy--one of my major clients--I would be in trouble.
I went to the bank. They said, "No problem. You have the
line of credit in place." It's not about me; it's about the
plan. If you have a good plan, and there is character and decent
credit behind it, the people executing the plan will be there.
You get the money. If all the executors have bad credit, then
you're suspect. I've seen people with crappy credit get loans,
if they have a good plan.
you know if you should launch your business with loans or bring
in equity partners (partners who take a piece of your company
for their investment)?
Polish: A bank loans you money on the interest they charge
and any other fees that they tack on--and they do tack on fees!
In making decisions to invest in you, they say, "What is
the likelihood that you will pay back the loan on time."
They need to like you and believe in you. They get paid back during
the course of the loan.
will evaluate you on the five Cs.
Do you have a good credit history? Have you borrowed money before
and repaid it? Have you ever run a business similar to the one
you are running?
Flow. Do you have the cash flow to make your payments?
Do you have more assets than liabilities, as a cushion if your
orders don't come in on time? What happens if your customers
pay Net 60 instead of Net 30?
of the economy at large and the industry you are operating
in. If your industry has deep economic fluctuations, they value
Tangible assets that would be sold or possessed that could help
them make up the payments that you haven't made yet.
evaluate you very closely on all five of these points. In many
respects, they are not concerned with what your business is. What
is important is, "Will they get the payments paid back, with
interest, plus all of the fees paid on time?"
Polish: Equity partners make money when they sell the
investment that they made in you. They don't get a penny until
they liquidate that investment. They have to evaluate whether
they will be able to sell their investment in you at all (i.e.,
will their be a market for your company's equity in the future),
how many years it will take to be able to do so, and what their
overall rate of return will be in their investment in you and
your company. They get nothing along the way, except heartache.
Equity investors are active, and they have a lot of control over
your business, as a result of that.
will want to know:
- Do you
have a product that is a "must have" or is it a "nice
to have." They want to know that customers will pay for
what you are offering. To do that, they'll talk to your customers.
the cost to obtain the sales you are projecting? Is your marketing
campaign going to cost $5 million, instead of $500,000?
- You and
the management team. They are backing you and your team. It's
not just you. It's the people you have assembled to partner
and execute your plan. They will do background checks. If you
are doing all of that, do you have advisors who are helping
- Size of
market. Is the business a billion dollar market? Will they see
20, 30 or 40 % return on investment? They want high growth,
a large market and people, at the end of the day, who will want
to buy their investment from them.
any advantage or disadvantage of bringing in equity partners as
opposed to just securing the money through a bank?
Polish: A bank or lender is a partner only while you are
borrowing money. If you haven't enjoyed your lender, you can fire
your banker and find another. If you have an equity investor,
family, friend, spouse, angel, etc., they are your partners until
they sell their shares. You can't fire them. You might be able
to marginalize them, but you can't fire them. Equity investors
will have a say in how you run your business. Lenders won't have
much of a say, and as long as you live within certain rules, they'll
stay off your back.
mantra is, "DROOMTM -- Don't run out of money!"
How do you avoid that? When is the right time to borrow?
Polish: It takes at least 3 to 6 months to raise financing
so don't wait until you're almost out to begin the process.
DeDominic: There is no one answer to that. When I took
out the $50,000 mortgage, I had a business partner that I needed
to get away from. We had two very different philosophies. He had
funny things he wanted to do with the Internal Revenue Service.
I don't do that. I'm concerned about being transparent. I do business
with government. You have to be naked. I didn't want to have trouble
with the IRS, or worry about "Who do you pay this week--payroll
taxes or rent." You pay both. When you sense that there is
a strategic opportunity to jump to the next level, that is a creative
use of capital. It's just a lot of people understand about financing
a new car or financing their house, but they don't get that you
can finance your business, too. Why is it that we wouldn't hesitate
about signing a mortgage, but we hesitate before signing a bank
loan? Would you buy a car or a house for all cash? Don't use
credit to dig yourself out of a hole. You use borrowed money to
move you from place A to B or C. You can even out seasonal
or annual opportunities when your cash flow needs are fairly stable.
you know if you have surrounded yourself with the right team?
DeDominic: Your Certified Public Accountant should refer
you to banks and to other people. Shop around, if your CPA isn't
giving you useful advice every quarter.
Polish: Same goes for your lawyer.
DeDominic: Your insurance person also has a lot of financial
savvy. A great hire nowadays is someone with a financial degree,
as a controller.
credentials include: iVillage, Goldman Sachs Ventures, Anthony
Robbins' Dreamlife, Inc., Critical Junctures Group, Harvard MBA,
is the Founder/CEO, PDQ Careers Group & Companies, the largest
privately held staffing and service firm in (the U.S.). She is
the past chairman of the Los Angeles Chamber of Commerce, Chairman
Emeritus NAWBO and has received many special recognitions over
YOUR DREAM BUSINESS:
Ten Point Checklist.
need to start your own business and some resources to help you.
Plan. Even if you aren't going to borrow money or bring
in equity partners, you should have a business plan. Would you
build a house without a blueprint? Try: Count-Me-In.org. SpringboardEnterprises.com,
or SCORE.ORG, which is part of SBA.gov.
Pitch. Come up with a two-minute, cohesive, coherent, catchy
pitch. You have to practice and work really hard to explain
what you are doing and why someone should get involved with
You need to know the terminology, and to surround yourself with
partners who are very experienced in launching successful ventures.
Patty DeDominic used to say, "Yeah, I have two MBAs. Meet
Beth Polish (Harvard MBA) and Jane Dough (Columbia MBA)."
Sign up for classes. Do workshops. Buy books. Contact the Small
Business Administration (sba.gov), SCORE (Score.org) and/or
NAWBO (Nawbo.org) for help.
Form an advisory board or council. Use their contacts. You can
borrow their social capital to raise capital. You'd be amazed
of the number of people who would be willing to do that for
you. You won't know until you ask. Get used to hearing "No"
once in a while.
your operations Lean and Mean… Patti DeDominic borrowed
office space. Silicon Valley entrepreneurs are notorious for
giving equity to their core team. Get your staff invested in
the company, and they'll stick with you during the leaner months
of your start-up. This is not the Roaring 1990s. Keeping costs
down, while you work for cash positive, counts.
Secure loans before you need them. Get liquidity and build up
reserves before the unforeseen occurs. The best time to get
more money or to increase your line of credit is when you DON'T
need the money…
a Social Network. Don't just hand out cards at breakfast
meetings. Start socializing and having lunches with business
people whom you can build meaningful and lasting business relationships.
Attend important conferences and forums that interest you and/or
pertain to your business… Join NAWBO and a networking association
more closely aligned to your business.
Site. Make sure that you can secure a dot COM domain if
you are a for-profit business and a dot ORG if you are non-profit.
Period. If the site is already taken, keep thinking of a better
name or catch phrase.
Issues: If you are ready to expand or launch, have been
in business less than three years and/or you have credit issues,
try CharoCorp.com for a lender that takes on more risk (for
a higher interest rate).
Chasing Your Tail: Don't bang your head against the banker
or the venture capitalist if they're not going to give you the
money. Many entrepreneurs rue the amount of time they wasted
chasing money in the wrong places.
chance to have four seasoned financial consultants give you a
personal money makeover. In this issue, a stay-at-home mom navigates
her way through one of the most difficult emotional and financial
changes of her life—divorce.
Wealthy financial consultants: Carista
Luminare-Rosen, Ph.D., Educational Director of Inner Securities
and Holistic Wealth Consultant, Stu Zimmerman, Chairman &
CEO, Inner Securities, Gregory Wendt, CFPÒ Money Manager
and Certified Financial PlannerÒ and Judith Green, Mortgage
and Real Estate Financial Advisor.
of this month's LIVING WEALTHY Candidate:
Doe (not her real name).
Age - 34
Children - 2 Children, ages 5 and 8
Profession - Housewife with B.A. degree
Income - $150,000 ( Husband's income)
- $120,000 in stock in husband's employer's company; $300,000
in house equity
House details - Bought eight years ago for $195,000; now
worth a little over $600,000; owe a $240,000 first mortgage and
a $60,000 second mortgage
One Year Life Goal - To have the divorce peacefully resolved
Five Year Life Goal - To complete graduate school and be
Ten Year Life Goal - To have enough money to send kids
to college and have a thriving career
Deepest Heart's Desires - Not to be so anxious about money
and my kids future .
Greatest Fear/Insecurity about Money - I will always be
seeks help, in her own words:
been a stay-at-home mom since my first child was born eight years
ago. My youngest is starting kindergarten this fall. With both
my children in school, I had planned to start classes this
fall at the university nearby to finish my master's degree in
counseling. However, my marriage has been in trouble for at least
two years, and this summer my husband moved out and filed for
Both our lawyers
say we have to split all our assets and sell the house to settle
the finances. If the kids and I have to move, they'll lose their
friends and I'll lose my support system and the fact that the
university is only a ten-minute walk from our home. We weren't
wealthy, but my husband's software sales career supported us well.
I know he has some stock from his company and a modest retirement,
and we have owned our home for six years. This divorce is tearing
me up, and my husband is very hostile. I've been trying to go
along with the lawyers' recommendations to keep peace, but I don't
feel right about this. Is there a better way for us to split up
without disrupting everything, financially as well as emotionally?"
Thank you for being so vulnerable in sharing your story with us.
It sounds like you are feeling a lot of confusion and pain, which
is a natural part of the healing cycle. It becomes even
more emotionally challenging for families with children, where
not only custody issues frequently create greater conflict, but
also the impact of the family splitting up can be very overwhelming
for everyone involved. Although these feelings can leave you feeling
lonely and afraid, very few people realize that about half of
all new marriages will end in divorce and "nearly half of
children will witness the break-up of a parent's marriage"
(The Abolition of Marriage, Gallagher).
are not alone and there is significant social support and resources
for you to navigate through this life crisis. There will be a
time when you will have greater resolution than you do now, and
it is important to give yourself time to explore and resolve your
insecurities. Consider searching on the Internet for ideas and
resources, and maybe explore some chat rooms to find some wisdom
from those who are seeking and finding help as well. You can Google.com
any subject on divorce, but here are some websites to consider:
www.makinglemonade.com is great for single parent networking and
divorce related themes. Www.co-abode.com is for those who are
seeking to share resources ranging from finances, to babysitting,
to emotional support and housing.
I suggest including a mediator or marriage/divorce counselor to
include in your support team. In describing your husband's hostility,
this emotional tendency can often become inflamed when working
through custody and legal issues. When compassion and generosity
are not available between the couple or lawyers, conflicts in
communication increase and negotiations often become unnecessarily
contentious. As we all know, this expands the time and effort
your lawyers spend on your case. For them, it improves their income.
For you, it depletes yours.
Even if your husband does not want to do any emotional counseling,
you can give yourself this gift which will nurture and empower
you to take care of your true needs during this difficult phase
of life for you. Your children may benefit from some counseling
as well, if they are showing signs of distress. Understanding
that funds are limited, an investment in your emotional security
will be the best foundation to clarify and strengthen your financial
security. A seasoned counselor can help reduce the legal fees
if a couple is able to minimize the emotional conflicts before
or during the time they pursue legal counsel. Individual or couples
counseling are usually much cheaper than legal fees.
You may find
your university offers free counseling services to you, or consult
your local yellow pages for local or state funded agencies that
offer support services for single mothers and those in major life
challenges similar to yourself.
a BIG DEAL, especially with children involved. Here are several
other perspectives to consider:
1.. Do you trust that your lawyer has the compassion and wisdom
for your best interests and those of your children? You can always
find a new one that makes you feel secure and safe. Make sure
your lawyer feels like an emotional as well as a legal ally and
is comfortable with hostile spouses who often choose hostile lawyers.
Do you want your lawyer to be a dolphin or shark in their temperament
with you as well as towards your husband?
2. What and who do you need besides legal support to feel you
can survive and thrive during this life challenge? Be specific.
Talk to people who have been through it, join a divorce group,
get therapy, surf the web for information. You will find divorcees
are a big international club!
3. What is your heart telling you that your kids need from you
during this big change in their lives? Are they getting
enough love and support for how this is affecting them? Again,
reach out to your professional community for guidance.
4. Have you considered that by releasing an unhealthy marriage,
this could be a new phase of life that is beyond what you dreamt
was possible to experience in a relationship? There are lots of
wonderful and mature men out there who have been through the divorce
cycle (or not) and are ripe for love. There can be an even healthier
life after the death of a marriage. Nature never fails to show
us how spring always follows winter, but you can't skip a season.
The same with the emotional cycle of grief. This is the time to
nurture yourself and trust that life is with you and wants the
best for you and your children.
Luminare-Rosen, Ph.D., Director of Education, Inner Securities,
Inc. She can be reached at Carista@Innersecurities.com
or visit the website www.innersecurities.com.
divorce is a huge life event, akin to death. It is most understandable
that you feel like you are in crisis mode. The Chinese use two
characters to define "crisis:" one represents "danger,"
the other "opportunity." Clearly, both danger and opportunity
are present in your life right now.
There is a
real danger that you and the kids become so filled with anger
or self-pity that you will not be able to appreciate what you
do have. Carista has shared with you that you may need to explore
your insecurities, which can be very healing. However, to avoid
reactions out of fear that don't serve you, focus on the opportunity
you do have to appreciate what exists right now and to proactively
create a new life for yourself and your children.
amidst all the turmoil in your life, what are you grateful for
right now? To fulfill your deepest heart's desire to not be so
anxious about money and the kids' future, you must be present,
not in the future. The future hasn't happened yet. Nothing is
guaranteed about the future… except that your thoughts, decisions
and actions right now will affect your future.
First of all, you are deeply loved and loving. You have the opportunity
right now to choose the thoughts that are most aligned to your
virtues at this critical point in your life. Write down your greatest
personal attributes, (e.g., compassion, honesty, integrity, self-love)
and take a few minutes each day to breathe new life into them.
As you inhale, focus on one virtue and strengthen it within you
by breathing into your heart. One the exhale let it all go, including
all the pain and struggle from your divorce. You will notice that
over time, you will be more peaceful, more natural state in which
more supportive and affirming thoughts arise.
can't take anything away from you as person that is your true
nature, no matter how hostile he is. You can choose to source
your inner strength, to be a role model for your kids and to bond
with them in a profound way throughout your family challenge.
Embrace the new possibilities as an adventure that can open untold
sources of love and money for you. Be true to what creates more
love in your life. Many blessings to you.
Chairman & CEO, Inner Securities. Stu can be reached at
or visit the website www.innersecurities.com
Your attorneys are taking the most common view of your financial
circumstances and looking at selling--liquidating--everything,
and then splitting the proceeds down the middle. Although that
is one legitimate approach, it doesn't take into account issues
such as transaction costs (sale of your current home, cost of
buying something new) and the likely losses you will face if you
sell your house and your husband's stock under the time pressure
to sell and settle, regardless of current market conditions.
You and your husband bought your house eight years ago, and have
seen appreciation raise your house value from $195,000 to nearly
$600,000. While this appreciation is a marital asset, the house
is also home to you and your children, a logistical asset because
it is so convenient to the university and the children's schools,
and a potentially appreciating asset for you if you can hold onto
Few people realize this, but several major mortgage banks have
set up guidelines that help people in your circumstances use refinancing
as an alternative to selling the house. You may think that refinance
costs might be expensive, but consider that a typical listing
contract allows for a 6% real estate commission, to be split between
the listing agent and the buyers' agent. On a $600,000 house,
that means that the net proceeds after a sale are reduced by $36,000,
and if you cut the price to sell quickly, the proceeds will be
even less. We can easily estimate that the apparent $600,000 value
of your house is reduced to $550,000 or less to you, if we factor
in cost of sale. Once you subtract your current mortgage and home
equity line, which total about $250,000, that leaves net equity
of $300,000, which the lawyers would have you and your husband
divide (minus the cost of additional lawyer fees to arrange all
Your husband has a little more than $110,000 in stock from his
employer--if he has to sell that under pressure, he will also
get less than the potential value.
Then, there's the issue of where you and the children, and your
husband, will live in new housing. If you and your husband each
purchase new property, you will face the out-of-pocket expense
of down payments and closing costs, which will also include the
same 6% (or more) transaction costs to the realtors who help you.
Additionally, can you qualify to buy a satisfactory new house
with no recent job history, and no recent reportable income? Your
house has grown nearly $400,000 in value in the past eight years
from your original purchase price--a simplistic calculation suggests
that the house has contributed about $50,000 each year.
Find yourself a compassionate and creative mortgage broker and
discuss these issues. If you have managed to preserve your good
credit score, you might qualify for a new mortgage under guidelines
that don't require you to prove income. And, if you will examine
some of the more innovative new loan products, you might find
a mortgage that will give you a payment based on a rate as low
as 1.5% (and sometimes lower!). Let's assume that you can qualify
for a loan of 75% of the $600,000 value, which is $450,000, or
about $100,000 less than the real proceeds from a sale. That new
loan of $450,000 works out to a monthly payment of $1552 per month,
based on a payment rate of 1.5%, which is less than your current
payment of nearly $2000 a month between your original first mortgage
and your home equity line. (For comparison, a 30-year-fixed mortgage
at 6% is $2685 per month on the same $450,000--a tough stretch
for a student single-mom to cover.) In your locality, a three-bedroom
town home is likely to rent for that much or more, but as a renter
you will lose out on any of that $50,000 per year appreciation,
and you won't get the mortgage interest deduction which helps
cut your income tax obligation. (This loan seems unusual, but
remember that the goal here is not about paying off the house,
but rather letting the family stay in the house for a monthly
payment that can be met for the foreseeable future.)
The net proceeds from this refinance should give you close to
$200,000 to help settle a property division with your husband,
without requiring that he sell his stock for less than optimal
value. So the math works out to $100,000 of your husband's stock,
$100,000 of present equity in the house which you can argue that
you could keep as you stay in the house (after factoring out the
true transaction costs), and the close to $200,000 of refinance
proceeds which you, your husband, and the lawyers can choose to
split as it makes sense.
Since the new mortgage payment will be similar to a reasonable
cost for appropriate rental housing, your husband's alimony and
child support contribution should help cover it, and leave you
with the additional benefits of continuing home ownership.
Fortunately you have already set your sights on a different, positive
future for yourself. This approach lets you stay in place, avoid
moving costs, keep the children in their familiar environment,
stay close to the university that will support development of
your new career, and avoid some of the expensive costs of trying
to qualify for a completely different new house.
This refinance also allows you to take your husband's name off
the title on your shared property, and separate your credit. You
should also look at any other credit cards or loans that you and
your husband share and make a point of paying off those obligations
and establishing new loans and cards separately. This is an important
issue that is often overlooked, but the best time to handle this
is now. You don't want to find yourself several years down the
line with your credit still intertwined with your ex-husband.
My best to you.
a mortgage and real estate financial advisor, specializes in problem
solving for clients with more complex or non-traditional lending
and credit issues. She can be reached for comments or to request
a consultation at email@example.com.
Judith has offered some excellent suggestions that make it clear
that you may not need to sell your the home. I would agree that
since your husband is leaving you in the home, then it would only
make sense that you keep the house as the primary asset from the
divorce, and your husband keep his securities and other assets.
You will need to explore these different financing options and
present them to your attorney, as your attorney may just not be
aware of the choices available to you. You may also want to get
a second opinion with another divorce attorney, who may be more
creative in exploring the different financial pathways available
in the marketplace.
As you begin moving on with your life and pursuing your goal of
being a counselor, you need to factor in the financial side of
the equation. You should evaluate your goals and plans for the
next five to ten years and attempt to quantify the costs versus
the financial resources available to you. Basically you need to
get a handle how much your dreams are going to cost and the resources
available to cover those expenses. At this stage, since you are
focusing on getting through this divorce and getting back into
the work force, you need a financial plan or financial "road-map"
of the next five to ten years of your life.
You should try and determine the resources available to you: the
amount of money that your husband may be paying you in spousal
and child support, and how much could be derived from the refinance
of your home. After you do that, prepare a budget of your current
and projected living expenses, as well as the potential costs
of attending school.
If it at first appears that you are not able to cover the costs
with the money from the refinance and support from your husband,
you should evaluate whether or not to consider financial aid.
I suggest visiting the university and speaking with admission
counselors about the options available to you for financial aid
or student loans. You may be able to get some student loans to
cover some of the expenses for your Master's degree. You may also
be able to find some work at the university related to your course
of study to help cover expenses, while at the same time gaining
Another very important factor in this process is to determine
the amount of future income you can expect to earn as a counselor.
As you prepare your budget and financial plan, you will
need to be realistic about how you will make ends meet after you
have finished school.
As you can see, there are many different factors to consider.
After you have gathered the information and thought about
the issues in front of you, a financial planner can definitely
help you to fine-tune your plan and help you to sort through all
of the different courses of action. Through the process, a financial
planner can help you to determine the best course of action for
your unique situation.
Get through this period. Take advantage of this time to re-tool
and prepare yourself for a whole new life ahead of you.
Gregory Wendt, CFP®
Premier Financial Management, LLC
Investment Portfolio Management, Comprehensive Financial Planning,
Socially and Environmentally Responsible Investing
If you want to be considered as a candidate for this Living Wealthy
column, go to www.innersecurities.com and click on "LIVING
WEALTHY." Fill out the "Living Wealthy Profile"
and "IS Quiz" and return to firstname.lastname@example.org.
For more information
on the Living Wealthy team , visit www.innersecurities.com
or call 707-425-2360.
Bad Hair Days and Inflation Have in Common:
Pace, CEO, NataliePace.com
twisting, teasing, tearing and gnashing of teeth won't change
a bad hair day, just as it won't bring gas prices back to the
good old days. Bad hair days and inflation simply do not cooperate.
They refuse to be ignored. They color every moment of your life
with worry, self-consciousness and downright anger. Why me? Other
people's lives seem just fine. Am I the only one dealing with
Wynne Pace Founder & Ceo, NataliePace.com
"spreading wealth by sharing wisdom"
The one difference
is that the bad hair day might be all over tomorrow. Inflation,
on the other hand, is here for a while, and could get worse, if
you believe David Littman, the chief economist at Comerica Bank.
Speaking on Kudlow and Cramer as far back as December 2003, he
warned, "In 2005 we're going to have a serious problem with
inflation and rising interest rates. I'm not worried about it
in 2004, but I'm critically worried about it in 2005 and 2006."
That was well before oil hit $50 a barrel on 9.27.04. With China
consuming oil products like there's no tomorrow and oil producing
nations running at full capacity, nobody is predicting a return
to $28 a barrel, and many are warning that $60 isn't out of the
question, with $80 a real possibility in the event of a successful
terrorist attack. "There is no supply anywhere that is going
to fix the demand that we have right now," one oil executive
admitted, speaking on CNBC on September 30, 2004.
Gas is more
expensive. Interest rates are rising. It's hard to imagine a company
or an individual who will not have their wallet squeezed as a
So… is there
anything you can do? Turns out, there is plenty you can do to
calm the effects, especially now, before the situation really
gets out of hand.
here, so deal with it. Don't keep running the status quo
(keeping your same level of spending) on the misguided hope
that oil prices and interest rates might go down or that inflation
isn't as big of a deal as reported. The Feds have been giving
away money for free for years to keep the consumer spending
and the economy running. There's a lot of pressure to raise
interest rates, meaning that your out of pocket expenses, especially
concerning debt, are likely to go up. High oil prices affect
many industries, especially automakers, utilities, retail (think
trucking), transportation, airlines, and more…
a haircut. Trim back on your expenses and spending NOW.
Don't bank on a raise or increased rise in the value of your
home to keep adding more fuel to your bank account. With most
companies still working to trim debt, increase productivity
and suffering under huge pension liabilities, it's a risky bet
that a cost of living raise is in the cards. It is far more
likely that your pension plan and benefits package will get
a haircut themselves. The statistics are sobering. 1/3 of the
U.S. Baby Boomer population begins retiring in just three years—2008.
helps. Make sure that you've got enough liquidity (cash)
to get through the next year of increased expenses, and lock
in a fixed interest rate NOW to smooth out the payments on your
home mortgage. Don't overlook your credit cards. Pay off your
credit card debt or transfer the debt into a fixed line of credit
Nets. They Look Crazy, but They Tame Out of Control Hair.
Do a serious assessment of whether or not you can afford your
home if interest rates rise by 3%. If this increase in your
monthly nut may crack it, you may need to look into a more severe
strategy, like downsizing to a home you can afford. Remember
that cash is king, and allows people to buy on opportunities.
With all the hoopla over real estate, if you sell your place
now and downsize to something you can truly afford in an environment
of rising interest rates, your friends will ridicule you. They'll
tell you that you are crazy and remind you just how much real
estate has gone up in the last few years. However, the easiest
way to lose money on any investment is to be FORCED to sell
at the wrong time, which could happen if you are overextended
when interest rates start to rise.
A little forethought
and preparation now should ensure that you'll be looking good,
no matter what inflationary headwinds develop down the road.
Stock Report Card: Airlines in Crisis
Pace, CEO, NataliePace.com.
Delta On the Ropes, United in bankruptcy and US Airways pending
liquidation, will Jet Blue and Southwest’s share prices
the top six U.S. network airlines are in serious trouble, and
all of them lost money in the first quarter of this year. Things
are so dire that insiders are predicting US Airways may be forced
to liquidate. "The chances of [US Airways] going out of business
are higher now than during the previous bankruptcy because creditors
have found ways to place claims on the carrier's cash to lower
their risk," Raymond Neidl, an airline analyst at Blaylock
and Partners LP, is quoted by the Washington Post, as saying.
exodus at Delta Airlines gives a clear signal of what the top
honchos there think about the future of that airline. In less
than a year, Delta has lost its CEO, COO, CFO, Chief Customer
Service Officer, and on October 1st, the President of Song, John
In the past,
Congress has come to the rescue, with loan guarantees that have
allowed airlines to keep paying bills, while they negotiate with
banks, unions and other partners to cut costs and return to profitability.
Since the turnaround plans have failed so far, however, Congress'
attitude and strategy has decidedly shifted. This time, Congress
is not coming to the rescue, according to the Chairman of the
House Aviation Sub-Committee. Speaking on CNBC, Congressman John
Mica said, "There is no stomach on Capitol Hill for funding
losing operations… If the airlines don't change, the major carriers
that are left, they will go by the wayside. If [labor is] not
competitive with the market you [have got to] get competitive."
Congressman Mica specifically named the low-fare carriers as the
airlines of the future.
One of the
biggest problems with profitability at the established airlines
is labor costs. Dave Siegel, the former President and CEO of US
Airways, spelled out the challenge at a speech for the Potomac
Officer's Club last February, saying, "Before our reorganization,
our CASM (Cost per Available Seat Mile) was north of 12 cents
per mile. Now it is about 10 cents. That's a pretty good improvement.
The problem is that the airlines that are making money—like Southwest
and Jet Blue—have CASMs in the 6 cent range…More than half of
[that four cent difference] is labor costs…. Our employees are
victims of the difficult reality that employees at other companies
are willing to work more hours for less pay, less benefits and
better work rules." Just how disparate are the wages between
network and low-cost carriers? Reportedly reservation clerks at
Delta make $22 per hour, while Jet Blue pays its people just $9
per hour for the same job.
As you can
see from their positive earnings in a sea of red balance sheets,
clearly Jet Blue and Southwest are the healthiest carriers in
this very diseased sector, but will fuel costs wipe out their
profits as well and negatively impact share price? Margins for
even the low-fare carriers are slim. The Air Transportation Association's
Statement for the Record on June 3, 2004 reports, "The U.
S. airline industry remains in a precarious economic condition.
From 2001 through 2003 it suffered a net loss of $23.2 billion,
plus an additional $1.6 billion in the first quarter of 2004,
with full year 2004 losses expected to exceed $3 billion…..Even
for those few low cost carriers who have managed to eke out a
profit, margins are slim."
Jet Blue and
Southwest also have new competition. Virgin is launching a new
low-cost carrier. United has Ted. Delta has Song. Dave Siegel
sees a future with a "swarm of low-cost carriers battling
it out in high-density markets." With the airline crash and
burn stories that have littered this sector for decades, it's
hard to make a case for a long-term hold of any one airline. Southwest
has been one of the few airlines to show consistent growth over
time, but one trip on Southwest after being spoiled by Jet Blue's
new planes with their big, leather seats and DirecTV at every
seat, and it's easy to see which airline has the product edge
most of Jet Blue's numbers look better than Southwest as well.
In August, JetBlue continued to dominate with the highest load
factor (89.3%), the highest earnings per share (.77 per share)
and one of the lowest price to earnings ratio, at 27.20. JetBlue's
share price has also shown a great willingness to pop, whereas
Southwest has traded consistently within an eight-dollar range
for years. JetBlue's 52 week-high was $47.14, over double the
October 1, 2004 price of $21.65. The question is, "Can JetBlue
show that kind of bump again?" With Congressmen and analysts
touting JetBlue and Southwest as models of what successful airlines
should follow, investor interest in those companies should heat
up. While the network carriers continue to falter, Jet Blue cames
out the clear winner of investor interest again and again over
the past two years, since their IPO. There's little reason to
believe that cannot occur again this year or into the first quarter
line: NataliePace.com believes JetBlue at $21 to be a real bargain.
The entire sector will show reduced earnings as a result of drastically
increased fuel prices. However, with the bad news concentrated
on network airlines, many of which are belly-up, more and more
investors will flock to the profitable airlines—Jet Blue, in our
opinion, over Southwest.
Stock Report Card here…
Airline Stats and Facts:
airlines, Southwest Airlines carried 7.1 million domestic passengers
in April, the most of any airline. (Bureau of Transportation
Average load factor was up 4.1%, to 76.3%. Jet Blue's load factor
is running at 89.3%.
- On 9.2.04,
the U.S. Department of Transportation reported that United led
the seven major U.S. airlines* in on-time performance for the
month of July, for the second month in a row. (source: United
- "At the
beginning of the year, the industry held out hope for a return
to some degree of stability, if not profitability. Yet, new
costs beyond our control wiped out recent efforts to cut costs
and achieve new efficiencies. Record high oil prices and the
nation's on-going war on terrorism, including sustained uncertainty
in Iraq, have presented new barriers to improving the industry's
economic health." Air Transportation Association's Statement
for the Record, June 3, 2004
employees agreed to significant wage reductions that deliver
$2.5 billion in annual savings. This is their investment in
United's future. That translates in some cases to a reduction
in pay of as much as 40 percent." Glenn F. Tilton, United
of others have made money off of the existence of the commercial
aviation business—plaintiff's lawyers, aircraft manufacturers
and suppliers, bankruptcy attorneys, hotels and other travel
industry partners, regulatory attorneys, airport concessionaires,
labor lawyers, not to mention the legal profession. But all
in all our success rate is pretty pathetic…" Dave Siegel,
former US Airways CEO, speaking to the Potomac Officer's Club
scoffed at our dream of creating a successful low-fare airline
based in New York City. They said we'd never find quality employees,
that no one would want to fly domestically from JFK, and that
we'd never be able to offer both low fares and a product that
includes new planes, leather seats and live satellite TV with
DIRECTV® programming. Twenty-two million customers later,
we're proud to be proving the critics wrong." David Neeleman
, Jet Blue CEO
- US Airways
is bankrupt for the second time. United is still in Chapter
11. Delta's chief executive, Gerald Grinstein, is quoted by
the Associated Press as saying, "Bankruptcy is a real possibility.
We're working hard and fast to avoid it." It's been an
executive exodus at Delta this year, with the CEO, COO, CFO,
Chief Customer Service Officer and the President of Song all
leaving for greener corporate pastures.
Airlines Corp. chief executive Richard Anderson resigned on
October 1st, in order to take an Executive Vice President
spot at United Health Group Inc.
is the only network airline to eek out a profit last year. This
year, with rising fuel costs, Continental is back in the red.
- There is
little case to be made for investing in any of the six major
network carriers, outside of shorting! Do not buy shares in
bankrupt airlines. Common shareholders are wiped out, typically
receiving ZILCH for their investment, when the company exits
on Inflation and Social Security, and other Notable Quotes.
moderating earlier this year partly in response to the substantial
rise in energy prices, output growth appears to have regained
some traction, and labor market conditions have improved modestly.
Despite the rise in energy prices, inflation and inflation expectations
have eased in recent months."
Board Statement on 9.21.04, after raising its target for the federal
funds rate by 25 basis points to 1-3/4 percent. To read the full
statement, go to:
cannot say with any degree of confidence that we have not made
commitments which we cannot deliver, until we are in a position
where we can say we know the resources will be available to meet
the needs of retirees and workers… who will be requiring a rising
standard of living…"
Board Chairman Alan Greenspan speaking before the House Budget
Committee on 9.8.04, on Social Security and the $7.3 Trillion
U.S. national debt, on which we pay $1 Billion interest /day
Estate - Mortgage Fraud
FBI has received more than 12,100 reports alleging mortgage fraud,
vs. about 4,200 in 2001, according to an Associated Press report.
The FBI is investigating 533 of these claims, compared with 102
10 Largest Purchases In September 2004 (per MoneyCentral.msn.com)
$ 8.47 Mil
10 Largest Sales In September 2004 (per MoneyCentral.msn.com)
RED ROBIN GOURMET
COAST INDUSTRIES INC
sales at Google were associated with the Dutch Auction. Insiders
selling at $85 price: Sergey Brin, $40.89M, Dr. Eric Schmidt,
$31.36 M, Time Warner, $121.35 M. YAHOO sold $242.99 Million AFTER
public trading began for a great premium on the auction price,
Natalie Pace, CEO, NataliePace.com
Your Own Mutual Fund with NataliePace.com Stock Picks.
of 2004, speaking on Cavuto on Business, I warned, "This
will be a choppy year. A day-trader's paradise. I recommend that
people reposition their portfolios and pull some profits off the
2004, the NataliePace.com articles focused on and encouraged on profit
taking. Since then, NASDAQ has been down as much as -12%. Both
the Dow Jones Industrials and NASDAQ are still off at -4% and
-6% respectively. In July of 2003, I agreed with Louis Navallier
that the election year would burn through summer and post strong
gains. After three years of steady drastic declines in the stock
market and dismal Octobers (think 9.11.01 and the market lows
of 10.22.02), the fall of 2003 turned out to be stellar, with
gains of 50% (NASDAQ), 24% (S&P500) and 22% (DOW Jones) posted
for the year. So what should the rest of 2004 look like? Will
the annual Santa rally (50% of the stock market gains typically
occur in the 4th quarter of the year) bring everyone
the gift of found money? Which Presidential candidate do the markets
in the markets will continue to be the overriding theme this year,
a day-trader's paradise, as headlines continue to whipsaw back
and forth between candidates. September's post-summer market dip
performed true to form, putting stocks on sale, but investors
need to pick their companies carefully, and look to take their
profits in shorter time periods. January 2005 would be a good
time to reevaluate positions. It looks like the Santa rally will
not disappoint investors who buy in this month, while the markets
are down, although the year-end finish is expected to be rather
limp. Joseph Lisanti, Editor of the S&P 500's The Outlook,
wrote on 8.16.2004, "We have lowered our yearend target for
the S&P 500 to 1130 from our previous estimate of 1150. Although
that represents a projected gain of only 1.6% for calendar
2004, it is about 6% higher than the market's current level."
the election spark a rally?
Though most money managers favor the tax and capital gains
incentives that Bush signed into law, and fear Kerry will take
them away upon election, I don't see more than a small rally—up
to 5%--if Bush is re-elected, or more than a 5% reactionary downturn
if Kerry wins (which should stabilize quickly on earnings reports).
The bigger problem is that both candidates have half of the country
against them. Unless or until there is compelling data that economic
glory days are returning to Wall Street, investors are going to
remain more interested in the outperforming asset class of recent
years--real estate (though there are many signs that real estate
is slowing down).
There is one
market, however, that I'm bullish on for the Santa rally and continuing
into early 2005- NASDAQ. NASDAQ is still oversold from the 2000
crash, running at -50% from levels in January 2000, compared with
-10% in the Dow Jones Industrial Average and -20% in the S&P
500. Along with a relatively high valuation and conservative growth,
many of the mature companies of the Dow Jones Industrial Average
are weighted down with pension concerns. This story will begin
to dominate headlines more and more, just as criminal CEOs were
oh so 2002. At the same time, the young, lean Internet companies
of NASDAQ are reporting the strongest earnings growth on Wall
Street. Yahoo's 2Q 2004 revenues were over 2.5 times higher than
2003 revenues for the same period. Even monolith Microsoft saw
revenue grow by 14% this year, with advertising revenue at MSN
up 43% (according to their September 2004 10-K filing). Seems
that Peter Schumpeter's economic theories on industrial innovation
are playing out for the Internet—that the first cycle (2000) ends
up a bust, while the second cycle (beginning this year) should
be the time when consumers embrace the new Internet technology
and incorporate it into their lives. The rush to high-speed connection
indicates that even the least cyber-friendly Americans are being
forced to connect online. The NDP Group is reporting that 41%
of Americans plan to do their holiday shopping online this year,
and most of that demographic is consisted of households with more
than $75,000 annual salary.
stock picking and short-term buy/sell strategies continue to be
key to attractive returns. Below are a few picks from NataliePace.com,
along with information on which NataliePace.com archived issue you can
find the supporting articles that explain why we believe these
companies are poised to lead their sector and are currently a
pretty good buy. Note that I have included a few companies that
are not NASDAQ, but do have presence in the current IT boom cycle.
price for a great company. Cyber security & server provisioning.
Big partners: EDS, MSFT, Hewlett Packard and more.
price for a great company.
on 10.12.04, three days AFTER AMD reports 3Q earnings. Investors
will likely sell on worry that the Flash sales were down.
We're not. Buy price should be more attractive.
and BUY on opportunity
like this at under $69. Oil will remain strong. Company
world's #1 most trusted brand.
leadership in all of its companies. Bought DirecTV when
other media (AOL-Time Warner) were at war and bleeding red
all over their balance sheets.
patents in 2003 for the 11th straight year!
and BUY on opportunity
liked the price of $89.60, where it was trading in May when
we featured it. Metals are huge.
flat screen panels for tvs, mobile phones and more. Based
out of Taiwan.
Against inflation with the gold mining company that nets
$300 per ounce.
for Buying Opportunity. At $25
this year was $11.65)
loved OSTK at $10.50 share, back when we featured the company
in April of 2003.
signings with school districts could help LF to beat earnings
when it reports on 10.27.04. Could bump the stock.
you Playing BLACK JACK with your retirement?
much of your nest egg should you have invested in the stock market?
"I'm 58 years
old, and very nervous about my retirement fund, which is currently
in the Stock Market. What should I do to calm my nerves?"
I'd be nervous,
too! That is like gambling your future on Black Jack—fun if you're
rule is that you should PROTECT 58%, a percentage equal to your
age, of your nest egg in completely SAFE investments. If you enjoy
the potential upside of the stock market, keep up to 42% (NO MORE!!)
invested in stocks. If the markets make you timid, trim back more.
Skittish investors make silly, and costly, mistakes, and market
crashes (like the one in 2000) can force retirees back to work.
Portfolio diversification is the best safeguard for your retirement,
but beware of bonds this year. They are real losers when interest
best way to calm yourself into the blissful golden years (yippee!!)
is to have a diversified portfolio, meet with your broker twice
a year and to start educating yourself! Anytime a sector of your
portfolio has a strong run-up, you take the profits and realign
the portfolio back to the desired percentages. Learning is one
investment that never loses, and money is a lot of fun, when it
is working for you!
is the CEO of NataliePace.com, "spreading wealth by sharing wisdom."
She is a respected financial commentator, and has been featured
on Forbes on Fox, Your World with Neil Cavuto, Good Morning
America, Time, USA Today, Cavuto on Business and More. Her
interviews with CEOs, like Marc Andreessen and Sally Krawcheck,
are rated in the top 5 Exec Picks on Forbes.com. www.NataliePace.com
Questions to Ask Your Broker before you hand over your money…
CFA Managing Partner,
Tierra Capital, L.P.
you are allowed to lease an apartment, the apartment owner typically
runs a criminal and credit check on you. Sometimes, they
also run checks to see if you have ever been involved in litigation
and other disputes. Do you find it interesting that before
most people hand over their money, which they have worked so hard
to accumulate, they typically don't ask any tough questions or
run any background checks on their broker? You're not alone.
ago there was a story about a fund manager that ripped off many
of Hollywood's most famous actors and actresses - who also failed
to do even a basic check. Likewise, there have been recent
examples of publicly traded company CEOs resigning after it was
discovered that their resumes were padded with some inaccuracies
or half-truths. Admittedly, sometimes asking the right (and
tough) questions can be socially awkward, especially when the
broker was referred through a friend or the person is super friendly-
but believe me, losing your money will feel a lot more awkward!
Here are ten tough questions to get you started:
1) What do I expect from my broker?
(important to know what your needs and expectations are first)
2) Years experience
3) Educational background (university,
area of study)
4) Years with current company
5) Any complaints with the NASD?
6) Ever been party to a lawsuit,
past or pending?
7) How is the broker compensated?
(based on asset collection, performance or commissions generated?)
8) Performance of their recommendations
9) What do they invest in personally?
10) References from three of their most long-standing clients
- who are still clients
Corporations More Powerful than Governments?
Marilyn Tam, founder & executive director, Us Foundation;
Former President, Reebok Apparel
you, the investor and consumer, can change the course of big business.
are growing in global importance and both brands and governments
are also growing in awareness of the need to balance the financial,
social and environmental welfare of the people and the planet.
" Marilyn Tam
It was a noteworthy
opening to any conference featuring a former supermodel slash
small business Bangladeshi entrepreneur, a former child laborer/Fortune
500 executive/author/consultant/philanthropist, the former Chairman
& CEO of Unilever Spain & France/President of International
Organization of Employers and the Director General of the Universal
Forum of Cultures Barcelona 2004.
How To Use What You've Got To Get What You Want
founder & executive director,
Us Foundation; Former President,
Photo credit: Clint Weisman
of the Corporation in the 21st Century
in the Barcelona Forum's sparkling new 67,000 square meter convention
center in front of over 800 global business and non-profit leaders
and some of the world's brightest MBA students. This unusual group
gathered on July 19-22, 2004 in Barcelona Spain to share, discuss
and create socially and environmentally sustainable business practices.
It was an exciting and sometimes contentious four days of dialogue
and intense discussions, ranging from optimism to bordering on
despair, on the state of business and the world.
I was that
child laborer who grew up to return as a business executive to
my native Hong Kong. My intention is to improve the working conditions
and environmental standards that I experienced when I was young.
What I face is the impact of global business, and the pros and
cons to development and economic growth. A jumble of wonder, nostalgia
and gratitude rushed through me, as I spoke to the packed room.
was another opportunity for me to make a constructive impact in
the world, a way to raise social and environmental consciousness
and collaboration between people, businesses and non-governmental
organizations. What a long way from the streets of Tai Po, Hong
Kong, China! The Universal Forum of Culture Barcelona 2004 (www.barcelona2004us.org)
was designed to gather people globally to share, learn and synergize
on the key issues of our time: Sustainable Development, Cultural
Diversity and the Conditions for Peace. Forty- five conferences
on these topics convened at the Forum from May 9 to September
26th. In addition, there were over 423 concerts, large-scale
multimedia and art exhibits from around the world and lots of
interactive entertainment being offered in this cultural extravaganza.
The Role of
the Corporation in the 21st Century was convened by
the top three business schools in Spain, ESADE Business School,
Instituto De Empresa Business School and IESE Business School.
The conference examined the role of the corporation as a creator
of wealth, an engine of social progress, and also as a negative
influence and exploitative force on cultural values and the environment..
The power relationships between the governments, large companies
and multinationals were also discussed.
this mean to you the investor, consumer and voter? We read cases
of how it seems that governments often bow to corporate pressure
to give subsidies, special tax breaks, and pressure other countries
to change their policies. In the 1950's, General Motors used to
say, "What is good for General Motors is good for America."
Is that true for all big brands? Do they still believe that what
is good for them is good for the whole country and even the world?
Or is it true that we as consumers, investors and voters have
woken up to realize that there are other considerations for what
is good for a country and for the world? What is the reality today?
Do we need
more regulation to ensure that governments are making policies
to promote the welfare of its people? Do brands influence governmental
policy so much that the greater social and environmental good
is that it is a balancing act. Brands are growing in global importance
and both brands and governments are also growing in awareness
of the need to balance the financial, social and environmental
welfare of the people and the planet.
What I would
like to bring up now is truly the most powerful force on the planet.
The power is in you. You are the consumer, the investor and the
voter. You can decide where you want to place your confidence.
Take the time and effort to find out about issues and vote
with your money, your voice and your vote.
governments have to respond because ultimately they exist because
you voted them in with your money or your vote. Public opinion
is very powerful. Even in countries where the government is not
so free, world public opinion have influenced the results. Brands
cannot prosper if we do not purchase their products. We have the
power in our hands. If we use our power, together we can achieve
whatever we want.
In the USA,
we had a boycott of Home Depot, a large chain of home improvement
stores, to make them stop selling lumber from endangered hardwood
trees. The result was that not only did Home Depot stop selling
endangered hardwood, but other home improvement store chains also
stopped selling endangered hardwood. Why? Because the brands were
responding to public opinion and consumer pressure. The consumers
and investors spoke. That is all of us.
show that investors are placing a 12% premium in the UK for a
socially responsible company and 30% more for one in Indonesia.
Corporations and governments are waking up. They are realizing
that when consumers and investors speak, they better listen.
No, it is
not perfect yet. We have many cases of corruption and back room
dealings in all countries. No country is immune to this. Our hope
and encouragement is that we can see cases of where public opinion
has made a difference when we work together. Together we can create
a world that is sustainable and fair for everyone.
This is what
the world needs now, a venue to gather in harmony and joy, to
learn from each other, to share and to celebrate the good, and
to work together to solve the challenges. The Barcelona Forum
was the dream of a dedicated group from Barcelona, Catalonia,
Spain and the United Nations, who saw the need for new ways of
dealing with the challenges of the 21st Century. They
have created a nonprofit organization, Universal Forum of Cultures
to develop this ongoing global happening. The next Forum will
be in 2007 in Monterrey, Mexico.
is an influential corporate leader, speaker, consultant, author,
respected philanthropist and social activist. www.HowToUseWhatYouveGot.com
to Use What You've Got to Get What You Want,
receives an average 5-star rating from Amazon.com customers. In
her book, Ms. Tam talks about how to discover your own inner North
Star, and how to use it to navigate your efforts to achieve maximum
personal success. The hardcover is just $14.00 on Amazon.com.
Check it out!
Tips for Taking Charge of Your Financial Destiny
Howard President of The Christopher Howard Companies author
of Three Steps to Wealth and Power
life you get what you focus on, so you either pay attention, or
you pay with pain. When you don't pay attention to your finances,
your habits of spending, saving, investing, working or handling
money, then you pay with pain." Christopher Howard
When you change
your mind about something, you change your experience of it. If
there is any room for growth in your finances right now, or if
you have a desire to grow your business, then it is time to "grow
your mind" by expanding your thinking. By creating a mindset
for wealth, you begin a revolution in your experience of life.
Here are seven
tips for taking charge of your financial destiny:
responsibility for your current situation. Realize that you
are where you are due to the sum total of your actions, as well
as your non-actions. To the extent that you blame your financial
situation on the economy or any other external circumstances,
you give up your own power to shape things exactly the way you
want. Let go of any reasons or excuses, and instead focus on the
results you are committed to producing now.
that it's all you! Regardless of the state of the economy
there are always people who do well financially. So, what separates
the people who do well in any circumstances from those who do
not? Their thinking. Your financial circumstances are a reflection
of your thought patterns, perceptions and beliefs. Some people
complain that "It takes money to make money. I don't have
any so I never will." But successful entrepreneurs realize
that money is created by good ideas. One great idea can practically
become your license to print money.
that having money requires focus on money. Many people have
been taught to think that they should not focus on, or care about,
money. In many circles, it is even considered taboo to talk about
it. In life you get what you focus on, so you either pay attention,
or you pay with pain. When you don't pay attention to your finances,
your habits of spending, saving, investing, working or handling
money, then you pay with pain. Begin to pay more attention to
every aspect of financial well-being and you can start to powerfully
navigate your financial future.
your financial pleasure centers. People who live their lives
without much money have often been conditioned from youth to associate
pleasure with spending. Those who do have money have often
been conditioned to associate pleasure to saving and investing.
They actually link pain to spending! That thought pattern
results in accruing wealth. Change your internal associations
and you can change your behaviors to ones that result in financial
security. Multi-billionaire investor Warren Buffett has said that
it's easier to make money than it is to spend it.
your financial vocabulary. Your language determines what concepts
are available to you. This is a surprising concept to some people
but think about it—if you don't understand the terms of the stock
market or the language of real estate, how can you make educated
investments? Increasing your financial vocabulary will expand
your thinking, and therefore open you up to new possibilities
and money-making opportunities. You can increase your financial
vocabulary by reading financial magazines, newspapers and annual
winning financial strategies. There are effective financial
strategies and ineffective financial strategies. One effective
financial strategy is to recognize the value of money and measure
financial expenditures based on return on investment. By measuring
financial expenditures vs. opportunity cost, or the cost of not
investing the money elsewhere, you may find that you begin to
curb unnecessary or wasteful spending.
a financial mentor. Who you are today is to a large extent
based upon who you modeled when you were growing up, however,
it is never too late to teach an old dog new tricks. If you feel
that your finances still have room for growth, study someone who
has the kind of success you desire and model the specific behaviors
and beliefs that got them there. This is one of the most powerful
actions you can take to immediately close the gap between where
you are and where you want to be.
determine your destiny. Taking charge of your financial destiny
can be as simple as making the decision to put each of these tips
into practice. Commit to even one of these and I promise you,
you will become aware of just how much power you really do possess
to achieve your financial goals…in spite of what anyone says about
Howard is an entrepreneur and internationally acclaimed results
coach. He is the author of Three Steps to Wealth and Power.
For more information about Chris Howard and his upcoming seminars,
check his website at: www.powerofinfluence.com
Or in Australia
Schedule. Don't miss these opportunities!
San Jose --Breakthrough
to Success--November 5-7
New York-- Breakthrough to Success--Nov. 12-14
Stefan Whitwell, CFA, Managing Partner, Tierra Capital, L.P.
another episode in the ongoing drama, Wall Street Scandals --
Mutual Funds. Before I proceed, I'd like to first make the point
that if you made the choice to invest in them, you bear half the
blame for the fact that you are getting ripped off -- and you
are getting ripped off, both ethically and financially.
that there are now more mutual funds than there are underlying
stocks. Yes, that is correct. Please re-read this one more
time. Now ask yourself, "Why do you think that is?"
Simple: financial brokers make money by forming mutual funds and
charging fees for doing so. So they continually just repackage
the same stocks with a new name and a new fund manager, and sell
them to investors who ASSUME that they are doing so with the investor's
best interests in mind. Investment banks make money from mutual
funds in a variety of ways, none of which involve them taking
any risk (commissions, broker spreads, management fees etc). If
the stocks do poorly, the fund management companies still make
Rule #1: It is best to invest in financial products where the
fund managers only make substantial fees if the investment performs
and makes you money. Even better: invest in funds where the
fund manager has some of their own financial money invested in
the fund.- This will help insure that your interests are aligned.
One of the ways you can find products like this is to ask your
attorney or accountant for introductions to real estate or private
equity fund managers. High-end attorneys and accountants almost
always have some fund managers as clients. It is also a good sign
when fund managers actively use the services of high quality accountants
and attorneys. Real estate partnerships and private equity funds
both tend to require the fund manager to invest their own capital,
and the better ones prioritize the return of capital to the investor
before the principals start making substantial money.
Rule #2: The only time you should invest in mutual funds or individuals
stocks instead of market indices, is when you have specific reason
to believe that you have picked a better performing fund manager
and that you have superior insight into which sectors/industries
or stocks will outperform (which most casual investors do
not, because they have day jobs and do not have the time or inside
connections required to personally interview all the fund managers
and analyze the industries' financial state of health). The best
way to invest in the index is through mutual funds known as "Index
Funds." Vanguard is one such firm that is well known
because they have some of the lowest fees on their index fund
product line. These are available through most online and in-person
Rule #3: Investing in mutual funds is like betting on a one-arm-boxer
fighting a guy with two arms of the same size. Does that sound
like a good bet? Mutual funds, by definition, are almost always
only allowed to buy stocks. They are not allowed to sell stocks
short, and they are almost always not allowed to go net short
the market. As a matter of practical reality, they almost never
move all their positions into cash, even in dangerous markets.
So that means that in sideways markets or in declining markets,
you are going to get hurt -- every time. In a future blog, I'll
explain why. It has to do with "relative performance".
So what is
the alternative? The short answer is what is commonly called
"alternative investments," like real estate and hedge funds.
Infiniti Capital has one of the best fund of hedge funds out there
and on their site you can find a lot of useful information that
will help you learn more about alternative asset classes: http://www.infiniti-capital.com.
state and federal regulators filed civil fraud charges against
Putnam (the 5th largest US mutual fund company with $272 billion
under management), their CEO Lawrence J. Lasser was forced to
resign. But, don't worry, he'll be okay. Despite the fact that
thousands of investors got ripped off, the ex-CEO will get a severance
package of around $89 million, according to the Wall Street Journal.
My favorite headline though relates to Prudential Securities Inc.,
which, according to the Wall Street Journal, received more than
25,000 warning letters that its brokers were engaged in improper
market-timing of mutual funds in the past year from mutual-fund
mutual funds made some sense 15 years ago. Today, however, you
need to think twice about blindly allocating your money to mutual
funds when much better alternatives exist, such as index funds
and private equity funds (both real estate and corporate).
hard for your money -- why not make it work hard for you?
Stefan Whitwell is on the advisory board for Infiniti Capital,
but he does not have any beneficial interest in them and will
not get any economic benefit if the reader were to get in touch
with them and invest in their product. (In fact, at last check,
they do not market to US investors and hesitate doing so due to
the US regulatory climate.) Infiniti Capital has a great amount
of information on their website that could be a source of learning…Most
investors, unless they have offshore accounts, will not be able
to invest there.
Note: Please be careful when selecting a hedge fund. Respected
Pimco Bonds Managing Director, William H. Gross, notes that "hedge
funds can be manufactured in anyone's backyard like a gallon of
moonshine whiskey." Steven Galbraith, principal at Maverick
Capital, has been quoted as saying, "The barriers to entry
in this business are nonexistent. It's roughly equivalent to creating
a lemonade stand."
investors [know] that they can do whatever their hedge fund manager
can do at 1/100th the price." William H. Gross,
Managing Director, PIMCO Bonds August 2004 Investment Outlook,
Lemonade For Sale.
VISION: To build
a global community of investors through a worldwide website, seminars,
radio, television and print partners.
GOAL: To provide high-quality, first-run, ethical financial news,
information and education, presented in an entertaining format,
across all media (television, radio, print and online).
MISSION: To provide the news, information and education investors
need to make better choices and to make investing as much fun
PHILOSOPHY: Member Mosaic. Piecing together a more complete picture
of the publicly traded company, one tile at a time, by valuing
firsthand consumer experience, conducting evaluations of the executive
team and lining up the numbers of the publicly-traded company
with its competitors in a Stock Report Card.
For more information on NataliePace.com contact us at info@NataliePace.com
NataliePace.com is NOT a stock brokerage service, and does not operate
or act as one.