Bush! Kerry!

by Natalie Pace, CEO & Founder of NataliePace.com ("wisdom").

Who Will Be Invited to the Texas Tea Party?

Earlier this year, sailing on the highs of the stock market returns of 2003 and a return of corporate earnings and capital spending, there was a lot of optimism that the markets would perform well again in 2004. NataliePace.com was more skeptical, calling for 2004 to be a day-trader's paradise, and warning investors to take their profits as early as January. As we predicted, day-traders have had a lot of fun with the volatility this year, largely prompted by escalating oil prices and rising interest rates, but for the long-term investor, it has been déjà vu 2002--more disappointments in an unbearable market. The Dow Jones Industrial Average is off 6%, NASDAQ is down 4% and the S&P 500 is finishing off just under the wire, at -1%. Joseph Lisanti, the Editor of the S&P 500's Outlook lowered their yearend target to 1130, projecting a meager 1.6% gains for 2004.

Do you think your candidate has the goods to bring back the Clinton highs (market, not marijuana) of the stock market? The macro truth in presidential politics this year is that it doesn't matter which candidate gets elected; half of the nation is not going to be happy about it. Both are stuck with inflation, rising interest rates and a $7.4 trillion public debt (source: http://www.publicdebt.treas.gov/opd/opdpenny.htm). Neither Bush nor Kerry will electrify Wall Street, more than a limp Bush victory rally or a tepid Kerry sell-off on fear of increased capital gains taxes. Both post-election events will be short-lived, as Americans turn in horror to the fire in their budget, fueled by rocketing oil prices and rising interest rates, which, rhetoric aside, are burning up the nation.

No concerns are greater than the price of oil and the daily terrorist strikes, which have kept investors from noticing that earnings on Wall Street have been up 20% or more on average. Yes, the economy is back on track and corporations are healthier. The problem is: so are interest rates and inflation. That remodel you were planning is going to cost at least three times as much as you planned, with the tripling in price of material costs. And considering the back-orders on some basics, you might consider yourself lucky to get what you need at ANY price.

Market gains were selective and thrilling, such as Google more than doubling from its Dutch auction price of $85, to $172.43 on 10.22.04. And losses were devastating, like Merck losing $19 billion in its market capitalization on the day it was announced that Vioxx had been pulled and hundreds of lawsuits were pending. Spectacular gains and losses, like roller coaster rides, are not for the faint of heart, and the markets are expected to continue this colossal trend in 2005, of flat to disappointing year-end results, marked by wild swings. Picking your companies carefully and timing your buy-in and sell is essential to profiting in the markets these days, and CASH is King.

The Santa Rally
There is still one great hope for 2004 that you might consider before you trade in all your stock certificates for savings accounts and gold bouillonÑthe annual Santa rally. Approximately 50% of the annual gains in the stock market occur in the last quarter. January, as we've said many times in our e-zine, is historically the top-performing month of the year, while September and October tend to be the most dismal. (ie. If you sell now, you're likely to be selling at an annual low.) Historically, the year of an election is the second best performing year of the 4-year cycle, second only to the year BEFORE the presidential election (when magical things happen, like 2003, to give the incumbent a strong platform to run on). With average S&P500 returns of 13.52%, election years trounce the returns of year one and year two of the presidential term, by 81% and 56% respectively. So the Santa rally, increased earnings (especially in NASDAQ, IT, media and electronics companies) and the election year cycle are all playing toward a favorable year-end to 2004, provided there isn't a successful terrorist strike or other major calamity on U.S. soil.

See below for a chart outlining stock market returns by the election year cycle.

S&P 500 Index Average Total Returns 1928-2002

1 Year Before Presidential Election	19.69%
Year of Presidential Election	13.52%
1 Year After Presidential Election	7.45%
2 Years After Presidential Election	8.65%
Overall Average	12.28%

Texas Tea Party
Just how likely is a Post-Election Santa Rally? We put the question to a few of our colleagues. Len Hartkemeier, a venture capital advisor from Malibu, California, thinks all roads lead to Texas teaÑoil. "I think it depends upon oil prices. If they fall after the election, there will be a rally. If they don't, there will not be." Len believes that if oil falls back below $40/barrel, the Dow will soar to over 11,000 in a month to two. Is that scenario likely to occur anytime soon? Doubtful.

Not many oil industry insiders see oil going below $40 a barrel, and most see demand pressures, especially in China and India, pushing prices even higher. One oil executive spoke candidly on CNBC last month, saying, "There is no supply anywhere that can keep up with the current demand." Back in April, when oil traded in the low $30s per barrel, Rupert Murdoch worried that a successful terrorist attack would take oil to $80, and now, just six months later, it looks as though $60/barrel may be the new settling point. With the political problems in Russia, the instability in Venezuela, the ongoing attacks on the Iraq supply chain, which have kept output running at under capacity for many months, and China and India drinking up oil and basic materials like growing teenagers, it is no surprise that oil is pushing new highs. It's hard to imagine a scenario in the near future, where oil falls miraculously to under $40/barrel.

In addition to oil dragging down operating margins (especially for airlines), many of America's more mature corporations are experiencing significant challenges with regards to their under-funded pension plans. It is very likely that defaults and reckless management of pension plans will become the headlines of 2005. We've already seen the network airlines struggling with this problem, and American automakers are not far behind. GM's answer to the pension problem is to demand super portfolio performance out of its pension fund portfolio managers, which means taking on higher risk with retirement money than is prudent. Higher risk is traditionally reserved for the young, who can afford to rebuild in the case of loss.

Newer companies in America, with their younger workforces and lack of retirees, have a clear-cut advantage, which is part of the reason why Jet Blue's cost per seat mile is the lowest in the airline industry. This significant phenomenon alone favors NASDAQ over most NYSE companies, which shows up both in earnings AND in the performance of NASDAQ versus the Dow Jones Industrial Average. Over the summer, NASDAQ rallied 8%, while the Dow Jones Industrial Average has lost 5% of its value. Companies like Yahoo more than doubled their sales, while Ford lost a percent in market share and posted another loss in its worldwide operating margins. Don't be overly infatuated with dividends and blue chips in today's climate. Dividends won't make up for significant share price losses. Earnings, growth, operating margins, debt and management (the visionaries and team who run the shop) count now more than ever. If you don't like the CEO or the management team, get out of the company stock.

Should you CASH OUT of the markets altogether? I was surprised to learn that Ben Horowitz, a Silicon Valley CEO, had only one holding in the stock marketÑa substantial holding in his own publicly traded company, Opsware, and nothing else. "I do not own any stock other than Opsware and don't plan to own any stock other than Opsware after the election," Ben wrote me in an email last week. Top money managers aren't CASHING OUT completely, but many portfolios are far more liquid than they've been in over a decade. If you haven't taken a look at portfolio diversification recently, now is certainly a great time to remember that CASH IS KING. It's not a bad idea to have a little more cash around to hedge against inflation and to capitalize on buying opportunities.

If Mr. Horowitz has so little faith in the stock market, why isn't he cashing out of his own company? In short, Ben believes in Schumpeter's Theory of Economic Innovation, that it takes two cycles for any new invention to become mainstream. Ben believes that this time the Internet is here to stay, and that investors who get in early are in line for a long, rewarding ride, akin to what occurred in the PC revolution of the 80s, which made Bill Gates the wealthiest man on the planet.

Turns out Ben isn't the only person placing money in Opsware.  Institutional Holdings have jumped to 48.6%. Stock Scouter predicts that Opsware will significantly outperform the market over the next six months with average risk," and Opsware's analyst rating has moved from a weak 4 out of 10 last year to a robust 7 today.

Sophisticated investors today are selectively picking their stocks, their sectors and their buys and sells VERY carefully. As Jim Jubak, a Money Central finance guru writes, "Investors can't really count on a favorable push from a rising market to help their stocks move upward. And that makes concentrating your bets in rising sectors -- and avoiding the falling ones -- just that much more important right now." So which sectors are winning? According to Michael Thompson, Financial Dir. Of Thomson Research, "There has been 73% earnings growth in basic materials. Energy earnings are up 38%. Technology is up 38%. The two chumps [losing sectors] are telecommunications and utilities."

NataliePace.com's stock picks this year have been heavy in metals, energy and technology. View our Stock Picks and price points here! Read up on why we believe that key great NASDAQ Internet companies are ready to explode in share price.

Finally, I'm going to include two paragraphs that came in from a money manager just as I went to press. Since crystal balls are not compatible with scientific analysis, most money managers prefer to remain anonymous when predicting the future. Agreeing to speak under the cloak of invisibility, here are the comments of someone I respect greatly.

(1). The stock market likes Bush a lot more than Kerry.  It's important to keep the tax on capital gains and dividends at 15% and not stick it to all those nasty rich people who create jobs.  Ever try to get a job from a poor guy?  About 2/3 of our economic growth comes from consumer spending. Raising taxes and giving consumers less money to spend will tank the economy.  If Kerry wins, the market will struggle.  If Bush wins, look for a rally of about 10% between November and January.

(2).  The economy is slowing and the government is lying about the inflation rate because they want to minimize the increase in Social Security.  Have you bought gas, health insurance, or anything else lately?  The 2% inflation number is a joke.  Returns in the stock market are about 50% lower in the years after an election, and slowing growth and rising inflation aren't going to make this time any easier.  We're getting defensive.  Well-diversified portfolios focus on companies that benefit from or aren't hurt by inflation. Small companies can respond faster that the big guys and should continue to outperform, and we love high dividend stocks and companies that are cheap.  Valuation will matter. Avoid high P/E stocks.

Diversify. Know your holdings and get rid of any rotten fruit. Believe your budget more than the government numbers when it comes to inflation. Get some inflation resistant stocks in your portfolio. Lock in the fixed mortgage rate on your home. Cash is king. Get some.

Full Disclosure: Natalie Pace owns shares in the following companies mentioned in this article: Opsware, Jet Blue.

Cancer cocktails:

By Paul Woods, President & CEO of Odyssey Advisors, LLC.

Investing in the $10 Billion Industry of New Cancer Treatments.

"The approach used by early chemotherapy is the equivalent of flooding a building to put out a fire in a wastebasket. In contrast, second generation drugs are designed to specifically target cancer cells and leave surrounding tissues undamagedÉ Keeping patients alive longer will also expand what is already a $10 billion market. The result is that some of these new drugs have enormous potential." Paul Woods

In spite of advances in the treatment of cancer, it remains a deadly disease. As our population ages, cancer rates are increasing. [Ed's note: There are roughly 76 million Baby Boomers who will begin retiring in 2008, totaling 26% of the total US population (US Census Bureau).] Many types of cancer are curable in their early stages, and many treatments can hold cancer at bay for a period of time. However, cancer cells have the annoying habit of mutating and eventually overcoming treatments designed to control them. A cure remains elusive and cancer will probably pass heart disease in the next few years and become the leading cause of death in America.

Cancer is a disease characterized by a breakdown of cell growth regulators. The resulting loss of cellular growth control allows cancer cells to proliferate rapidly. For this to occur, tumor suppressor genes also have to fail to function. These are genes that normally inhibit the division of cells if they detect DNA damage or defects in the cell. Unfortunately, cancer cells have the ability to overcome both these genetic systems and overwhelm healthy tissues.

The First Generation Treatments: Chemotherapy
First generation cancer chemotherapy is composed of compounds that target and kill rapidly growing cells. Unfortunately, hair cells, cells in the stomach lining, and bone marrow cells also grow faster than others. The result is that most first generation chemotherapy leaves a patient bald, sick, and with a severely damaged immune system.

What many patients aren't told about first generation cancer chemotherapy is that 20-30% of them will die from the side effects of the drugs, not the disease. Another 25% of cancer patients are too sick to be given these drugs. In spite of this, the current market is believed to be in excess of $10 billion and growing rapidly.

The Second Generation: Genetically Targeted Approaches
The approach used by early chemotherapy is the equivalent of flooding a building to put out a fire in a wastebasket. In contrast, second generation drugs are designed to specifically target cancer cells and leave surrounding tissues undamaged. The goal of these treatments is to make cancer a treatable disease by stopping tumor growth and preventing cancer from metastasizing.

By eliminating the poisonous side effects, cancer patients that are too sick to be given first generation drugs can now be treated. In addition, keeping patients alive longer will also expand what is already a $10 billion market. The result is that some of these new drugs have enormous potential.

The Fly in the Ointment
Before getting specific, we need to add one caveat. New drugs require approval by the Food and Drug Administration. In the last few decades, the amount of time required to obtain approvals has doubled. There is new leadership at the FDA saying all the right things about speeding up the drug approval process. However, predicting drug approvals remains extraordinarily difficult and the FDA almost always seems to find a reason to delay the first drug from a new class of drugs. For this reason, investing in companies with drugs awaiting approval by the FDA is very difficult and we recommend that investors focus on companies with drugs already on the market.

Following is an overview of some of the most promising new treatments and the companies that currently appear to have the strongest positions.

Monoclonal Antibodies
The body's immune system is programmed to produce antibodies when foreign substances like viruses, bacteria, and tumors are recognized as invaders. These invaders produce antigens and the body's immune system in turn produces proteins that seek out these antigens and destroy them. Monoclonal antibodies are specialized antibodies engineered to target specific antigens produced by tumors and attack them without harming healthy cells.

One of the first drugs to show the potential of second-generation cancer treatments was Rituxan, marketed by Genentech (DNA) and Biogen Idec (BIIB) for the treatment of lymphoma. Rituxan has been on the market for about six years and is at least as effective as first generation cancer drugs without the poisonous side effects. This drug now produces sales of well over $1 billion and is still growing rapidly.

Anti-Angiogenesis
Angiogenesis involves the formation of blood vessels to support new tissue growth. Cancer cells grow faster than others and have a constant need for new blood supplies to supply nutrients and support this growth. Anti-angiogenesis is designed to starve tumors of the blood necessary to support them by arresting the growth of new blood vessels.

In May 1998, the New York Times created a furor by running an article on this technology and announcing that a cure for cancer was finally on the horizon. EntreMed (ENMD) was featured and its stock rose 75 points the day the article appeared, even though the company had yet to begin human trials. Once human trials began, results were mostly disappointing. Scientists discovered that it's very difficult to target blood vessel growth on tumors only, and most investors dismissed this technology.

Genentech continued to press ahead and it's fair to say that the investment community was stunned when the company announced in May 2003 that their anti-angiogenesis drug, Avastin, showed very positive results in treating colorectal cancer. Just as surprising was having the FDA approve the drug in near record time in February 2004.

Avastin sales are now growing rapidly, but may just be scratching the surface. Most solid tumors including those associated with breast cancer, lung cancer, and prostate cancer are likely to have at least some susceptibility to this drug, and it appears to have blockbuster potential.

EGF Receptor Blockers
Epidermal growth factors are proteins secreted by various types of cells to promote cell growth. They bind to receptors on the membrane of cells and this process eventually leads to the cell receiving a signal to divide. Epidermal growth factor receptors are found on most solid tumors, and the goal of this technology is to essentially put gum in the lock to prevent the key from being inserted. If these receptors can be blocked, it makes it very difficult for many types of solid tumors to grow.

Erbitux, the drug produced by ImClone Systems (IMCL), is the most notorious drug in this group. It was granted fast track status by the FDA for the treatment of colorectal cancer, only to have the New Drug Application rejected in December 2001. While the company's founder and his girlfriend ended up in jail for trading on this news before it was public, the real scandal was the unnecessary delay by the FDA.

The FDA finally got around to approving Erbitux in February 2004. While they were dithering, over 300,000 people died of colon cancer. Erbitux would probably have helped a significant percentage of these, but no coherent explanation was ever provided for this delay. Although Erbitux is priced at a premium and is currently being used as a second line treatment for colon cancer after Avastin, it also has the potential to be used in multiple types of cancer.

Meantime, AstraZeneca (AZN) had already received approval in May 2003 to market Iressa in the U.S. for the treatment of lung cancer. This is a very large potential market, but AZN is already a huge pharmaceutical company, so even a blockbuster drug will have a fairly modest overall impact. However, being first to the market and pricing the drug more reasonably than Erbitux gives Iressa a big competitive advantage for the time being.

In the meantime, there's another very impressive EGFR blocker waiting in the wings to treat lung cancer. OSI Pharmaceuticals (OSIP) has partnered with Genentech (DNA) on a drug named Tarceva. This recently demonstrated a remarkable survival benefit in advanced human trials. In patients with lung cancer that failed to respond to initial or secondary treatments, Tarceva increased survival rates by over 42%. FDA approval is possible in early 2005. AstraZeneca is also conducting broad scale human trials on Iressa, but it they can't match Tarceva's impressive survival statistics, OSI's drug may end up becoming the front line treatment in this market.

Tarceva became an even more interesting drug in September with the announcement that it also appears effective in the treatment of pancreatic cancer. In a broad scale human trial with patients suffering from advanced pancreatic cancer, Tarceva increased the survival rate by 23.5%. This is noteworthy as there are few treatment options at present, and pancreatic cancer is the fourth leading cause of cancer deaths.

Cancer Vaccines
Cancer vaccines are an old idea that may finally be showing some promise. The idea behind this treatment is to stimulate the body's immune system to recognize a tumor as a foreign body. Once recognized as such, the body's immune system produces cytotoxic T-lymphocytes (CTLs) that bind specifically to cells with antigens they recognize and kill the targeted cells. When done, the CTLs go to more cells with these antigens and repeat the process until no more of these can be found.

For cancer vaccines to be effective, several conditions have to be met. First, tumor cells must have tumor-specific antigens on their surface. Second, CTLs must be able to find these antigens. Third, CTLs must recognize these antigens as foreign. Finally, the immune system must be able to summon the cavalry and attack and kill the cancer cells. A vaccine that can overcome all these obstacles can, in theory, cure cancer.

The problem is that different vaccines overcome each problem with varying degrees of success. Some stumble on one hurdle; others have a problem with the next. Until further advances are made, it's likely that this therapy will eventually be used in conjunction with surgery or with treatments already discussed to try to clear the last traces of the disease or prevent cancer from recurring.

Because these vaccines target specific tumors and may not be a first line treatment, the potential market is not as large as treatments targeting multiple types of cancer. However, the companies developing these vaccines have relatively small amounts of outstanding shares, so even a drug that eventually generates $100-500 million in revenues can have a significant impact upon earnings.

Dendreon (DNDN) appears to be closest to the market with a vaccine named Provenge for treating prostate cancer. A clinical trial now underway will be used by the FDA to evaluate the drug and determine whether or not the drug is approved. If the trial is successful, this drug may be on the market in 2006. Cell Genesis (CEGE) also appears to have promising cancer vaccine technology that appears to be a bit behind Dendreon.

[Ed's Note: Provenge is in Phase III trials, and should be complete in about a year. Looks promising so far, but need more information before getting too excited. Provenge isn't likely to be on the market until 2006. Look for an update in NataliePace.com issue 55.]

Gene Therapy
Genes and the proteins they produce control every stage of life, including disease. As we already discussed, cancer is the product of a breakdown in the genetic systems designed to control it. It's the result of defects in either cancer promoting or cancer inhibiting genes. The successful completion of the Human Genome Project and the broader understanding of DNA opened the door to the enormous potential of gene therapy.

Gene therapy is a technique for the treatment of disease that entails the manipulation or inhibition of defective genes, the replacement of missing genes, or the direction of therapy based upon gene detection. The goal of gene therapy is to repair the root cause of all disease, including cancer. However, like the college football coach said, "Potential means you ain't done it yet."

The most promising technology in this area is antisense, which focuses on overcoming diseases by preventing the proteins that cause disease from being formed. Antisense is essentially a jamming signal that targets the RNA that carries instructions from DNA to the cells. Antisense creates a mirror image of the RNA messenger that spreads disease. When injected into the body, it's supposed to bond with the RNA and prevent it from delivering its message to the protein building machinery. According to one scientist, "It's like cutting the wires from central command to the troops. All I have to know is what gene I have to screw up."

Unfortunately, this isn't nearly as easy as it sounds. It turns out the dummy genetic material often does more than just snip communication between bad genes and their deadly proteins. Many antisense drugs have been found to negatively affect other genes and proteins not implicated in disease. Still others have proven ineffective in snipping the wires. Enormous potential and drugs that have yet to demonstrate it have characterized this therapy to date.

Genta, Inc. (GNTA) and its partner Aventis (AVE) are in advanced human trials with Genasense, a drug that continues to show mixed results in treating a number of cancers. It has a number of trials underway for multiple myeloma, leukemia, melanoma, kidney cancer, pancreatic cancer, and lymphoma. So far, the drug has shown some benefits but has not significantly increased survival rates. Until this changes, it's hard to get too excited about Genta.

Isis Pharmaceuticals (ISIS) is the other dominant company in gene therapy. It has a number of drugs in research and has partnered with several high profile pharmaceutical and biotech companies. However, it has also not yet found a drug that demonstrates effectiveness in advanced human trials. If it does, it has already partnered away a big chunk of any potential profits.

Engineered Oncolytic Viruses
Engineered oncolytic virus technology is still in its early stages. It's not as advanced as the treatments already discussed, and is still too early to evaluate. However, it's based upon a very intriguing idea. Engineered oncolytic viruses are viruses that cannot survive in healthy cells. They are designed to be able to only survive and reproduce in cancer cells. In cancer cells, the theory goes, they reproduce very rapidly and cause the cell to burst. Once free, they find more cancer cells and repeat the process until all cancer cells have been wiped out.

There are a handful of companies involved in this area. The leading company appears to be Cell Genesis (CEGE). It's in early human trials, and progress appears to be worth monitoring.

Conclusion
Many of the different types of treatments discussed so far are complementary. Because they have limited side effects and target different aspects of cancer, it's realistic to expect some of these to be used together once they reach the market. The cancer cocktail of the future may very well include monoclonal antibodies, anti-angiogenesis, EGFR blockers, cancer vaccines, and gene therapy.

The eventual goal is to make cancer a treatable disease by stabilizing or shrinking tumors. In the meantime, however, cancer patients can expect to live longer with a better quality of life, and cancer patients too sick for first generation drugs will now have treatments available. This will allow what is already a market in excess of $10 billion to expand significantly. With impressive drugs in several of these areas including one potential blockbuster, Genentech (DNA) appears to be the best-positioned company in this group.

Like most people, I have lost too many friends to cancer. However, there's a quiet revolution now going on in treatment that promises to improve the quality of life for cancer patients and may eventually make this a treatable disease. A number of treatments are emerging for solid tumors, and we're sharing this information in case you have friends or loved ones now undergoing treatment and looking for alternatives.

For disclosure purposes, it should be noted that Odyssey Advisors, LLC has investments in Genentech, ImClone Systems, and OSI Pharmaceuticals.

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

Celebrity Poker Challenge:

by Natalie Pace.

Super Star Biotech Companies of Tomorrow (Includes Biotech Stock Report Card). Which one will win the championship pot in your portfolio?

Hot New Drugs and the Companies That Own Them in the $10 billion Plus Market of Cancer Cocktails.

DNA's 3Q 2004 Sales of $1 billion are up +54% over last year. Myrtle Potter, president of Commercial Operations, reports that DNA "is actively preparing for our next milestone with the anticipated launch of Tarceva." On September 20, 2004, DNA and OSI Pharmaceuticals completed Phase III Tarceva trials, which demonstrated 23.5% improvement in overall survival for pancreatic cancer patients. If the FDA agrees with the results and is not measurably concerned with the risks (mostly rashes, according to the study results), the New Drug Application could be approved anytime between now and early 2005. Pancreatic cancer is one of the most deadly diseases on the planet, with less than 5% survivability rate. Drugs that extend life by even a few months are blessings to many families, which should improve the odds that the FDA will approve the NDA. Additionally, as Paul Woods noted in his Cancer Cocktail article, Tarceva works on the same premise as IMClone's Erbitux, which has already been approved. Tarceva's survivability rates are even more impressive for lung cancer.

FDA approvals are rocket launchers for a biotech's stock, but Genentech has a few clouds in its blue sky, which, depending on how well the stories are managed could rain on the parade. Insider trading isn't a reliable measure on its own, but, given that a criminal and civil investigation of Genentech (NYSE: DNA) from the US Attorney's Office in Pennsylvania was formally announced in October and the consensus insider selling at Genentech of $85 million occurred in April and May, there is cause to smell something fishy going on. There is another concern, as well. The problems with Avastin causing deadly blood clots in a small portion of those receiving the drug hit the newsstands in August. These are a series of red flags that can be a major drag on the share price, especially if any of these back page items become headlines. I agree with Paul Woods that Genentech is diversified in some of the most promising cancer treatments available, but over the next year, it is at least somewhat likely that the negative press of the Rituxan investigation or the Avastin arterial blood clots will find an audience and spook investors. If you want a shot at the pop of the FDA approval of Tarceva (assuming it occurs) without the potential legal problems at Genentech, OSI Pharmaceuticals might be a better play.

Genentech has had a lot of volatility in its share price since 2000, providing great profit-taking opportunities for day traders. I'd watch closely and buy on opportunity, below the 52-week low of $39.75. Merck and VIOXX should continue to weigh down the Biotech sector, especially the high profile companies, like Genentech, which have question marks of their own on their star drugs.

Prison and Drugs: A Tale of a Wayward Executive
Typically, you'd expect to see heroin or cocaine as the drug associated with wayward executives, but IM Clone's founders actually created a miracle cancer drug. The original executives have been booted from the company. Sam Waksal is in jail for insider trading, as is his buddy, Martha Stewart. Sam's brother, Harlan, was asked to leave the company for tax issues related to the sale of over $50 million of IMClone stock. (Interesting that Harlan's sale of stock occurred just two weeks before Sam's more notorious, criminal action, but that's a story we wrote a year and a half ago.)

What most people don't know about IMClone is that Bristol Myers-Squibb is a major partner. In fact, Daniel S. Lynch, IM Clone's CEO, was an executive at Brisol-Myers Squibb for 15 years, prior to joining the executive team at IMClone. Bristol Myers-Squibb has a big stake in IMClone and is a blue chip play for your portfolioÑfor stability and dividendsÑ only if you overlook what money managers call "notoriously creative and aggressive accounting." Bristol-Myers Squibb was one of the 350 companies that had to restate earnings a few years back. To date, BMY has been content to let IMClone take most of the glory for Erbitux, so you'll likely to see a lot more movement with IMClone stock than with BMY.

1Q 2004 Erbitux sales came in at $17.5 million, with Bristol Myers-Squibb reporting the sales and IMClone receiving a 39% royalty on the sales. IMClone's European partner, Merck Germany, issued a cash payment of $5 million to IMClone on 8.5.04 for reaching a major milestone in Europe. IMClone's drug has received a strong bill of health and sales, and is being considered for approval for other forms of cancer, instead of just colon. According to Business Week, Standard & Poor's analyst Frank DiLorenzo sees peak annual sales for Erbitux at $2.3 billion by 2012. On 10.28.04 IMClone beat earnings by a noteworthy amount. Analysts surveyed by Thomson First Call were looking for the company to post earnings of 33 cents per share on sales of $83 million in the latest quarter. IMClone's net income was 45 cents per share, on total revenue of $94.8 million. Considering that IMClone will be adding European sales in the coming quarters, through its partner, Merck KGaA, earnings should continue a positive trend. Alternatively, however, IMClone is carrying a lot of debt and the valuation is considered to be high.

Bottom Line: Though Genentech is a strong long-term bet, the current legal inquiries there and the Avastin arterial blood clots both have the potential to become larger stories and could present a buying opportunity at a later date (or a major losing opportunity for investors who get in before the stories run their full course). To date, Genentech has been very good at managing their press, and you'll likely see fireworks when/if Tarceva is approved by the FDA, something both OSI Pharmaceuticals and Genentech (partners on this drug) are waiting for. For investors who can handle a little spice in their portfolio, NataliePace.com is recommending OSI Pharmaceuticals as a buy now, looking to capitalize on an FDA approval of Tarceva. This is a risky bet that could be well worth it, if the FDA approves the drug.

Be patient with Genentech, and buy on weakness, at under $40.00 share. If the DNA low occurs before the Tarceva FDA decision, odds are your investment will yield strong returns. Keep profit taking to a narrow window, however, in case the other problems emerge.

Investing in the markets today is very risky, as you can see from Merck. All it takes to tank share price is one terrorist attack, one drug gone very badly or a press conference wherein Eliot Spitzer mentions your company's name. Be cautious and practice portfolio diversity, fundamentals and a more than normal portion of liquidity. Consider "playing" in the markets to be a key phrase. Don't play around with more money than you can have fun with

Putting the Fun Back in FUNDS:

by Natalie Pace.

5 Ways to Make Investing More Delightful Than Shopping.

Natalie Wynne Pace Founder & Ceo, NataliePace.com "spreading wealth by sharing wisdom"

1. Value the Information that You already HAVE. Joy, an NataliePace.com member shares her FUNding secrets: "My best tip is to find what feels fun to your personality, fits your budget and then play with it. Don't be afraid to make or lose a little. When things aren't going right, ask somebody what's up. Don't be embarrassed! Plus, it is more human than it looks. Don't discredit your own experience of sales, kids, life and reality. That really has helped me. I was scared to get startedÉand I've overcome my fear. This is a blast! This is a mecca for women at home. We can change our lives here. It is not beyond anyone who is intelligent!" Joy, NataliePace.com chatter, October 13, 2004.
   
   
2. Stop shopping. As Chris Howard, respected empowerment coach notes, "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." Reprogram Your Brain to love saving and investing more than spending. The easiest way to do this is to change your behavior. Every time that you get the urge to spend, check the performance of your stock holdings, read an article on real estate or research that company that you've been meaning to invest in. Change your behavior and watch how the results come in. Every time you spend, that is money OUT THE DOOR. If you instead water your money tree, it grows.
   
   
3. Don't throw in the towel every time your investment takes a hit. This is tricky because you are going to have to start educating yourself, instead of operating through fear. It is human nature to be disappointed when an investment goes down. What determines the ultimate outcome of that speed bump is whether or not you have champion or loser mentality. Make sure that if your stock, real estate or other investment is on the ropes, you evaluate whether it can go the distance, instead of just throwing in the towel the first time your fighter goes down. Cashing out for GAINS is FUN, FUN, FUN. Throwing in the towel and taking the loss reinforces those old sob stories you may have of loss and failure. Throwing in the towel too early, before evaluating the situation, is a message to yourself that you will never have the stamina, will power, determination, and smarts to become a winner. Champions overcome adversity and rise to the challenge. They only take a dive if it looks like continuing the fight is going to prevent them from ultimate victory (at a later date). In other words, if you're holding an Enron (or possibly Delta Airlines, which is skirting bankruptcy right now), take the loss. It's better than dying. You can always enter the ring again on stronger footing. If you throw in the towel after careful evaluation, you will feel like a champion. (Imagine all those elated people who cashed out their Enron stock at $16, instead of waiting for the bankruptcy filing!) If you hang onto a distressed company and win, you'll dance on the ceiling, like those IMClone investors who saw their shares rise as high as $87.24, after the FDA approved Erbitux.
   
   
4. Start Investing NOW! If you don't know how to swim in the markets, wade in or put on some water wings. You'll never learn if you don't get wet. Try investing a comfortable amount ON YOUR OWN NOW so that you can begin your path to financial wisdom (and to becoming the brains behind your portfolio and a better partner with your broker/financial planner). Stocks are still relatively low on the year and we are entering a period called the Santa rally, where most of the stock market gains are made each year. Historical trends are working in your favor right now, especially if you re-evaluate your investment and/or take your profits in January. Pick a company that you like or pick one that a respected financial pundit recommends. NataliePace.com has a number of recommendations in the STOCKS ON SALE article in issue 53. Try the Stock Picks from your favorite magazine or money guru. Investor's Business Daily and Motley Fool have good track records.
   
   
5. Take Your Gains in Shorter Time FramesÉ These days, anything more than a 10% gain is good, anything above 25% is great and doubling your investment is outstanding. Gains on paper can disappear BEFORE you get the joy of OWNING them, as anyone who was invested in the stock markets in 2000 knows or anyone who has had their home destroyed in a hurricane, earthquake, fire or other natural disaster! There is a big difference between all and nothing. You can keep some chips on the table, if you believe the company still has legs, but don't be afraid to reap the harvest and eat a little of the fruit now. President Bush has adjusted the tax code so that your tax liability is much lower than in the past.

Real Estate Values Go Down 10% in Las Vegas:

by Natalie Pace, CEO, NataliePace.com

Is Your Town Next? Q&A with Steve Dietrich, President of FRG, and a Guest Lecturer at the Anderson Graduate School of Business, UCLA.

FRG is a Southern California based real estate consulting and development firm.

Pulte Homes cut prices in Las Vegas, one of the nation's hottest real estate markets, from 5 percent to 28 percent, with most in the 10 percent range, according to Pulte Homes Vegas President, Sheryl Palmer said. While this isn't exactly the popping of the great real estate bubble, one of the most impressive asset performers in the last four years, it is cause to re-evaluate your current position. If you're looking to BUY now, you need to understand the dynamics of a declining market and the possibility that your mortgage could go underwater, at least in the near term. If you're tempted to cash in the equity you've built up, either to free up some cash for other investing or because you believe that a slow down will make some of your profits disappear, then rising interest rates, flat or declining growth in values and increasing supply, with more homes sitting longer on the market, all point to the fact that the high in the real estate market likely occurred earlier this summer. To make sense of the new statistics and to get some real world counsel on how to maximize profits and protect against losses, NataliePace.com members had the opportunity to question Steve Dietrich, a respected real estate consultant.

NataliePace.comÑSo, what's the bottom line? Will real estate values start to decline?

SteveÑWe're seeing that now. One of the largest homebuilders reduced their prices in Las Vegas by 10%.

I know someone who bought a new home in summer, hoping to sell their old home in summer. They look to be a little strapped. The old home isn Ôt selling, and worse, there just aren't that many people looking to buy. This, by the way, is in Southern California, one of the hottest real estate markets in the world over the past few years.

Steve--For someone buying long term, you cannot afford to be only 10% smart. It is more important to find the home that fits [so] that you will not be forced to sell in the short or intermediate term.

Is that another way of saying that right now is very likely as high as the market will go? With values declining, are you concerned that new buyers will get underwater on their mortgage? What's the best advice that you can give right nowÑwait a year or two to buy?

Steve--I would be very careful in my selection of a home and also in the amount of debt. I would not want to have to sell the home over the next few years.

As the rate of sales decrease in some markets there will appear to be bargains, which might simply be an overpriced market marked down to market. Over the past few years, if a home went on the market in a hot areas above market price, it simply waited for the market to rise. However, if the market goes flat, the overpriced homes will accumulate.

It is important to remember that real estate is immobile and thus, local. It is important to look at the forces driving the local market. Often it is an industry or a group of industries.

For the last few years, low interest rates and liberal lending policies have lead the rush, don't you think? More than local factors? Are we now looking at a period where the markets return to the fundamentals?

Steve--It has been the availability of financing which has created demand in a market where the overall supply was constrained in the short run. The fact that rates have been low for a sustained period has encouraged the production of housing. It takes a long time to get raw land into finished housing.

Are there any bargains out there today, or is most everything overpriced by at least 10%?

SteveÑThere will always be people who need to sell in any market through changing family conditionsÑdeath, health, marriage or divorce. My neighbors just dropped the price on their home 10% in a very hot market because they were not getting buyers and they need to sell and move.

Toronto NataliePace.com chatter: I'm wondering if I should sell my condo, due to an oversupply of condos.

SteveÑIt really depends upon your personal goals and resources, plus the market. I think homes in my area will decline, but I like where I live so I'm not thinking of selling.

Some of the unique characteristics of high rise condos is that they take a long time to build and they come in large sizes. In a low-rise condo development, you can phase the project in small batches, but with the high-rise development you get a lot of condos on the market at the same time. You frequently get a number of builders building at the same time, which further increases the market risk.

It is very hard for a development team to stop working on a project which they have invested millions and several years. The temptation is to keep moving ahead and imagine that the market will improve.

Do you see inflation or deflation in the future?

SteveÑIn the development business, we are seeing very large price increases, some of which are temporary and others which are longer term. We are in a unique situation. We are at war, and probably more than at any time since the British sacked DC, our homeland is threatened. This is the real wild card. Not much we can do about it but to lean a little more to the conservative side of the boat.

What about wood prices, nails and cement? A friend said that everything had tripled or more in price and that you can't even get cementÉ

SteveÑChina has become a huge consumer of construction materials, plus a lot of producers of local materials have closed. The hurricanes consumed vast amounts of plywood and other materials.

Any last thoughts?

There is more randomness in the world than we would like to admit.

If you have a question about real estate, we'll put it out there to our community of real estate experts, who have decades of experience. Please send an email to ShareWisdom@NataliePace.com, with Real Estate Question in the subject.

Energy Lights Up a Dull Market:

By Paul Woods.

A Look at the Performance of Stocks and Bonds, by Sector, in the 3rd Quarter.

Oil prices are now over $50 per barrel and prices of many other commodities and services are also rising. We doubt this genie can be kept in the bottle much longer, and expect to see rising inflation into 2005. This, coupled with slowing profit growth, will probably make it difficult to produce high returns in either stocks or bonds next yearÉ We remain cautious and would continue to emphasize quality, liquidity, and shorter maturities in the bond market." Paul Woods, CEO, Odyssey Advisors

Summer is usually a difficult period in the stock market, and 2004 was true to form. Volume was light as the stock market performed a partial bungee jump in the third quarter. The market declined for the first six weeks, and then rallied without much enthusiasm for the rest of the quarter. By the end of the quarter, the stock market was either up or down slightly for the year, depending on whether "the stock market" is the Dow-Jones, S&P 500, or Nasdaq.

During the third quarter, large companies outperformed smaller ones, value outperformed growth, and REITs and energy were the place to be. Income stocks also did well, and we were pleased to see that our equity income portfolios produced a total return of just over 6%. For reference, here's the stock market and industry group scorecard for the third quarter:

This year is another reminder that, in the stock market, changes in valuations are what make it difficult to forecast returns. With a recovering economy, earnings were up over 20% at the end of the second quarter and estimates were revised upward every month. However, this was more than offset by valuations. Between higher energy prices, uncertainties over the election and the economy, and the Federal Reserve increasing short-term interest rates, investors found enough reasons to sell stocks and push valuations lower.

In the fixed income market, the differential narrowed between short-term and long-term interest rates. The Federal Reserve continued to increase the Federal Funds rate at a snail's pace that should keep Alan Greenspan in the news as long as possible. Meanwhile, in the real world, bond yields declined during the quarter. Slowing economic growth and mixed readings on inflation took some of the pressure off the bond market. However, we remain cautious and would continue to emphasize quality, liquidity, and shorter maturities in the bond market.

As we look into the remainder of the year and 2005, leading indicators seem to be implying that economic growth will slow to a more sustainable pace in the next few months. Oil prices are now over $50 per barrel and prices of many other commodities and services are also rising. We doubt this genie can be kept in the bottle much longer, and expect to see rising inflation into 2005. This, coupled with slowing profit growth, will probably make it difficult to produce high returns in either stocks or bonds next year.

However, the recent decline in stock prices appears to have discounted some of these problems, and the election will resolve a major uncertainty for investors. As we head into what has historically been a good time to own stocks (November-January), we wouldn't be surprised to see the stock market end 2004 with a positive return. Our response to this environment is to keep the portfolios well diversified, pay attention to valuations, and invest in sound businesses.

Ask and Receive:

by Stefan Whitwell, CFA, Managing Partner, Tierra Capital, L.P.

Negotiate To Improve Your Life.

Negotiation is the wisdom of knowing what you want and the courage to ask for it.

How well do you negotiate?

Stefan Whitwell, CFA Managing Partner, Tierra Capital, L.P. http://whitwell.net

One of the great lessons in life - which is rarely taught in school - is that life is negotiable. What this means is that you have the power to shape your life. Few people know this. There are lots of people who do not choose their own path and live life passively - accepting whatever (often frustrating) circumstances arise.

The art of negotiating is equally important in business. The purpose of this article is not to instruct you in the art of "how," but to inform you that you can and encourage you to more actively negotiate. Let's start by asking ourselves, "What is negotiation?"

Whitwell Rule #1 - "Negotiation is the wisdom of knowing what you want and the courage to ask for it." Negotiation, if done well, is a positive activity that rewards the proactive and penalizes the passive. Done well, it also earns you more respect from the person with whom you are negotiating. Remember: it is worth your while to negotiate.

Whitwell Rule #2 - Most things in life are negotiable, no matter what people tell you and even if the printed materials suggest otherwise. For example, many of the services provided by banks and financial institutions are negotiable, but this is a fact that most firms will never publicly admit. A funny quote that comes to mind involves a retort to the oft-repeated statement that money cannot buy you love-- "But it can certainly improve your bargaining position!" Here is a list of things that are price-negotiable. How many of these things have you negotiated before?

• Bank fees
• The interest rates banks charge on debt
• The interest banks pay you on your savings accounts
• Insurance fees (premiums)
• Security brokerage commissions
• Real estate brokerage commissions
• Car prices
• House prices
• Salary and bonus
• Real estate taxes
• Hotel room rates
• Furniture prices in stores
• Fine jewelry in high-end stores
• Legal fees
• Accounting fees

Whitwell Rule #3 - Negotiation creates many additional non-financial benefits. For example, a major benefit of negotiation is the educational process it creates. You will learn a lot more about the businessmen you are dealing with and the economic reality of products or services if you negotiate. In addition, the daily practice of negotiation will increase your self-esteem and stimulate your creativity, by training yourself to think through situations without the usual constraints of what most people think is possible and impossible. Successful negotiation also increases your attentiveness to the needs of other people since the surest way to reach agreement with others is to meet their needs.

Whitwell Rule #4 - Your choice of attitude and choice of language makes a big difference in the outcome of your negotiation. If you think, "There is no way they will agree," then you will probably be right. If you think, "I believe they will accept," they probably will. Your state of mind is crucial. Your language is equally powerful. For example, if you ask, "Can you lower this price?" they will often say "No." If instead, however, you ask "How much will you lower the price?" people will almost always respond with a price reduction in your favor. It can be quite fun. Give it a try.

Let me give you some real examples that I have been involved in the last two years:

1. Last year I gave notice to vacate an apartment that I had been renting in Tokyo. One of the customs in Tokyo is to charge obscene fees to tenants when they leave under the guise of Ôcleaning charges'. I do not like this tradition so I negotiated. I arranged to have my apartment cleaned and then told my broker that I would only pay for specific damages (such as the remote which I had lost) and that I would not pay for a duplicative cleaning fee, since I had just cleaned the apartment. In Japan, brokers tend to represent the landlord (who provides them future business). Nevertheless, I did not want to pay $3,000 just for the sake of tradition. Predictably, the broker came back and told me my request would likely be rejected. In return I told him that I confidently expect that the owner would honor my request and made it clear that I was unwilling to consider anything to the contrary. Several times the broker came back and asked me to reconsider. Each time I made my case. Months passed. I withheld the last months' rent until this was resolved. Last week I got an email from the broker with the news that the owner was only going to charge me $500 instead of the "traditional" $3,000. The point is that no one was looking out for me in the system and that by negotiating, I got a better deal.
   
   
2. This example relates to a moving company with whom I had a dispute (moving things from Tokyo to the United States). Despite a fixed price contract, the moving company tried to bill me an additional $2,000. I did not agree with their reasoning (since it was a fixed price contract) and I insisted on asserting my rights. After many emails back and forth, they came back with a compromise offer of only $1,000. Although this was movement in the right direct, I continued to negotiate and eventually reduced the additional payment to only $500. In this situation, despite the fact that the contract was on my side, the reality is that legal action would have cost me more time and money than I was willing to invest and importantly, they had significant leverage over me since they had in their possession and control a lot of items that I valued and did not want to lose. I persevered and succeeded in negotiating a significantly improved result from the one that we were facing at first. The point of this story is that even when you feel that your position is unfavorable, because the other side has some type of leverage they can use against you, stay calm and remain focused on your goal.
   
   
3. Another example relates to my company, Tierra Capital which runs a real estate investment fund that focuses on buying assets at a cheap price, improving the assets and then selling them for a big profit. We are in the midst of negotiating a deal on a 70,000 square foot building in a major city in Texas. A bank currently owns the debt on this property - which went through bankruptcy several years earlier. We are negotiating with the bank. When we first found out about this deal, the bank was selling the building for $2.5mm, even though six years ago the previous tenant/owner had spent over $6.0mm improving the property. When we inquired about the price, we were told by the selling broker that there was no way that the bank would consider an offer below $2.5mm. We told the broker that we were not interested (since we think that the price is still high based on current rents in the area). Despite what the broker told us, we put in a bid of $1mm, and we have been told that there are two other bids for $1.5mm that the bank is seriously considering. In this case we probably will not win the bid, but the point is that sometimes it is worth focusing on what you think makes sense in negotiations, instead of what people tell you is or is not possible.
   
   
4. My last example is particularly telling. As mentioned above, I run a real estate fund. Several months ago we deposited millions of dollars into our bank account, with a famous brand-name bank. Would it shock you to learn that the bankers were happy letting it sit in a non-interest bearing account? I was livid that I had to proactively ask for the best service - and that if I had failed to ask, I would have gotten bad service (low interest). I called my banker and specifically asked for the best money market rate they could give me that still provided me instant access to the funds (they will tend to offer higher rates if you commit to time-deposits). I find it absurd that you have to specifically request the best rates (as if anyone would ask for mediocre rates) - but as my example proves, if you do not ask you do not receive. After requesting their best rates, they increased my annual yield to 0.95% from 0.00%. At the same time, I asked one of our summer interns to see if there were better deals being offered by other major banks. Indeed he found a bank that was offering rates of 1.75%. I was incredulous. So I again called up my banker and told him he had to further improve my rate and do so in a hurry - despite the fact that I was getting what he claimed was the "best rate" they can offer. Long story short, within 48 hours, he had arranged for me to get 1.65% (a dramatic improvement). If you think it is the bank, think again. Most banks operate like this. If you think it was my banker, think again. Most service providers (with few exceptions) operate like this. The onus is on you to stick up for your needs and ask for better service. It is mind-blowing that one needs to do this sometimes, but asking is much better than not asking.

On a different subject, I think this is one reason the Japanese are going to face some economic challenges in the next decade. The Chinese are master-negotiators. They negotiate every second of the day without stop. Most Japanese, by contrast, have never negotiated anything significant in their life. As a consequence, the Japanese do not understand negotiation-based investment strategies, such as corporate and real estate private equity, and instead they put most of their money in interest accounts bearing little to no interest. This passive strategy is risky.

Most often, value comes from work (as opposed to passive strategies). Negotiation is one of the tools you can use to create value in business and in your personal life. Like any tool, there are times to negotiate and times not to negotiate, but the overall message is make sure that negotiation is one of the tools in your toolbox. People who are proactive and focused on desired outcomes will outperform those that are totally passive - not just in investing but also in many areas of life.

Make It Happen!

http://tierracapital.net
http://whitwell.net

The Sandwich Generation:

A Professional Gets Help Navigating the Financial and Emotional Trauma of Placing Her Mother in an Assisted Living Facility in this month's LIVING WEALTHY series.

LIVING WEALTHY: Your chance to have four seasoned financial consultants give you a personal money makeover. In this issue, aging parents!

The Living 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 Planner, and Judith Green, Mortgage and Real Estate Financial Advisor.

Profile of this month's LIVING WEALTHY Candidate:
Name- Jacquie Cho ( not her real name)
Age - 49
Single/divorced- divorced 15 years and not remarried
Children - grown, independent
Profession - auditor with state agency

Annual Income - $65,000

Net Worth - $45,000

Asset Allocation - $35,000 vested retirement, $10,000 savings
One Year Life Goal - To see my mother settled comfortably in assisted living
Five Year Life Goal - To have money coming from sources other than my job
Ten Year Life Goal - To know I have enough to be able to choose to retire
Deepest Heart's Desires - I want to be in an intimate relationship

Greatest Fear/Insecurity about Money - I will not have enough money to retire

Jacquie seeks help, in her own words:
"My mother has been an example of independence for me. After Dad died ten years ago, she even bought another rental house to add to the three properties they had bought together. She's been slowing down, though, and now she wants to sell the houses and move into a retirement community. Her health seemed good until she had a heart attack last winter. Now she feels that her remaining time is limited, although she might still live many years.

She has asked me for help in figuring out her future. I'm her only child, and we live in the same town and talk to each other every few days. One of her friends just decided to cash everything in and buy fixed income securities. Another friend of hers just got a reverse mortgage, so she has been looking at these alternatives.

Mom has four houses, each now worth about $250,000. They've appreciated a lot, and now might be a good time to sell, but she's been living off the rental income, and I don't know if bonds or annuities can replace that. I've also wondered about buying rental property, since they've done well for her. I don't have money for a down payment, though. I've been a renter since my husband and I divorced fifteen years ago and sold the house to settle our finances.

CARISTA'S RESPONSE:
Dear Jacquie,

It sounds like you are very devoted to your mother and she is lucky that you are so available to assist her as her health becomes more challenged. Without your dad around, and being an only child, I wonder how emotionally free you feel to choose your role in supporting your mom. The oldest of the "old population", 85 and older, is growing faster than any other age-based segment of the American population (U.S. Census Bureau). With rising costs in residential health care, you are not alone in being a primary caretaker of an elderly parent. Not all children are able to care for their parent's emotional and financial needs as they age and become more dependent on family support.

In hearing your concerns for your mom, it is perfectly natural to do everything you can to "figure out her future." Make sure you are honoring your own short and long term needs equally as well. Too often, family members compassionately respond to each other in times of crisis. Yet, when the health care necessities become long term, many family members are more vulnerable to enter into a co-dependent relationship. With awareness, you can always re-design the functions of your roles if they become unfavorable for anyone involved.

There is a user-friendly definition of co-dependency I like to offer my clients to help them clarify if they are in undesirable dynamics -- financial, physical or emotional. If you are in a relationship where your way of giving is either healthy or unhealthy for the other person, but clearly UNHEALTHY FOR YOU, and you continue the same behavior/pattern between you, this is the essence of co-dependency. In caretaking another, the question to ask you is, "What is healthy for me as well as the other person?"

So, I ask you: Is it healthy for you to help your mother financially set up her assets for her future or yours? Perhaps bringing in an independent financial advisor may support both of you so that you don't burden yourself while ensuring that your mother gets the advice she needs. With all your interactions with your mom, including how often and when you talk to and visit her, you can ask yourself a two-part question: "Is this healthy for Mom?" And, "Is this healthy for me?"

This way, both of you are assured of giving each other the support that brings out the best in your relationship, and expanding your support circle to include those who can assist each of you to live the balanced inner and outer life you desire.

Carista Luminare-Rosen, Ph.D., Director of Education, Inner Securities, Inc. To contact Carista directly to share comments or for a consultation, she can be reached at Carista@Innersecurities.com or visit the website www.innersecurities.com.

STU'S RESPONSE:
Dear Jacquie -

I would like to help you move past your biggest fear you mentioned in the profile: the fear of not having enough money for your retirement. For so many people, and over 76 million Baby Boomers are retiring over the next several years (US Census Bureau), this fear is based on financial reality. In your case, is this fear based on fact or fiction?

You seem to have a close relationship with your mother and you are her only child. It stands to follow that you will probably inherit a significant portion of her assets upon her passing, which could be ample for your retirement needs. You and your mother should consider consulting with a family attorney that specializes in trusts and estates to ensure that her property and holdings pass through to you in a tax efficient manner.

I also want to support you in fulfilling what you wrote as your deepest heart's desire to be in an intimate relationship. You really don't disclose much about your personal life, so I can only ask you some broad questions to consider. If being in an intimate relationship is so important to you, how do you make it a priority in your life? What actions are you taking to be in the position to meet possible mates? If you are dating, do you let your date get to know the "real" you? Does any pain from your marriage that ended in divorce stand in the way of being involved again?

To fulfill your deepest heart's desires, you need to be honest with yourself. Based upon what you have shared about your concern for your mother, the plain truth is that you are a loving, caring person who deserves to be in an intimate relationship. If you can just rest in that fact, then you may choose to take some new action steps to have a more fulfilling love life... just because you do deserve it! And, Jacquie, perhaps your next step can be to do something loving just for your self. Give yourself an allowance!

Stu Zimmerman, Chairman & CEO, Inner Securities. To contact Stu directly for a consultation, he can be reached at Stu@innersecurities.com or visit the website www.innersecurities.com

JUDITH'S RESPONSE:
Dear Jacquie,

You are fortunate to see, through your mother's example, some of the benefits of rental property, and yes, you should consider this for yourself as well. You don't say what the properties cost in the first place, but if she owned them an average of 15 years, she and your dad probably bought them for around $100,000 each. (This assumes an average of 6% appreciation per year. In some areas, appreciation has run much higher.) That means the properties may have gained as much as $600,000 more than their original value just through appreciation, and that creates financial options for your mother's retirement.

As you help your mother through this transition, you have an interesting opportunity to help each other financially. Many people find the down payment to be the biggest psychological and/or financial obstacle to purchasing property, especially rental property where lending guidelines are more restrictive than for owner-occupied property.

If your mother is willing to sell to you, she could help by carrying a portion through holding a note for a second mortgage. Your new purchase-money lender will bring in a large chunk of new money to cash out the first 75% or so of the house value, and your mother can carry the "down payment" portion, allowing you to finance 100% of the property. You and your mother can discuss interest rates on this type of loan, but I suggest that you see what a bank would charge, and use that rate as a guideline.

Depending on your mother's monthly cash flow needs, she might even consider deferring monthly payments for a time, while you adjust to the financial realities of being a landlord or homeowner. For example, on a $250,000 house, your new lender would be bringing in $187,500. If your transaction costs ran 5% (including a modest transaction fee to a Realtor or attorney, and the costs of your new loan), your mother would get $175,000 cash in hand, per house. On your side, the monthly payment on a $175,000 mortgage is probably less than what renters expect to pay. Remember to look at interest-only mortgages. For example, $175,000 at 6.5% simple interest is less than $950 per month. That's a way you can manage your monthly cash flow and get into property.

One piece of caution: if your mother wants to stay in her primary residence a little longer, and she's considering a reverse mortgage, encourage her to explore other alternatives in house financing. The reverse mortgage is more costly and much more restrictive than many other mortgage products that are available these days.

Judith Green, 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 createmoney123@netzero.com.

GREG'S RESPONSE:
Dear Jacquie:

In order to make your decisions easier, you need to determine some of the costs associated with your goals.

For your Mother's needs, I suggest that you visit a number of assisted living facilities in the area close to you to evaluate the quality of care and the range of costs. Once you have determined the cost of your mother's living expenses, you can explore all of the avenues suggested by Judith to finance a comfortable retirement for this period of your mother's life.

As far as your goals of extra income and retirement in 10 years, you need to begin taking action right away. If Judith is correct that you are able to purchase a property and enter a financing arrangement where your mortgage is equivalent to your rent, then it would be a great start in accumulating a retirement nest egg because your dollars for rent are now going toward equity in your home. Secondly, if you are able to rent out the properties, you may be able to derive some additional income beyond your employment.

One challenge however, is that in ten years you may not have accumulated enough equity in your property to meet your retirement income needs. I suggest that you meet with a financial planner to work through the figures.

Before you meet with a financial planner, you will need to gather some information. You will need to determine the amount of money you spend now and based on that, you can estimate what your expenses will be in 10 years.

After you have estimated the amount you need to live on in retirement, you should look at the income side of the equation. To begin with, your employer may have some retirement benefits and/or pension available to you. Contact your employer and the social security administration and request an illustration of your projected retirement income. The difference between your expected expenses and the retirement benefits is the amount you will need to cover with your savings and investments. If you decide to purchase the real estate, at some point in the future you will be able to estimate the amount of income available to you in 10 years.

If you have difficulty with estimating these figures you can discuss them with your financial planner. Your financial planner will be able to determine how much you need to have saved at retirement in order to cover the difference between your estimated income and expenses. From that calculation, you financial planner will be able to create a savings schedule for you. If it looks like you have a shortfall and you are not able to save enough to retire in 10 years, you will need to explore other avenues to make up the difference between your savings and your retirement accumulation goals.

You can begin today by finding ways to increase your current income and/or reducing your current spending so that you are able to save more for your future. If that is not enough, you should to consider working for a longer period of time beyond 10 years.

The good news is that you are moving in the right direction and asking the right questions now. Good luck!

Gregory Wendt, CFP®
www.gregwendt.com <http://www.gregwendt.com>
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 wealth@innersecurities.com.

For more information on the Living Wealthy team, visit www.innersecurities.com or call 707-425-2360.

LIVING WEALTHY - November 2004

Metals Update:

Copper Hits $146/ounce!

China is building at a Biblical pace, eating up basic materials with insatiable growth. Meanwhile, metals companies are raising prices and stepping up growth, but are having difficulty keeping up with demand. Opening up new production in the mining industry is about as easy as painting a big red stripe on Mona Lisa, so, for the foreseeable future, demand pressures favor the metals industry.

Our pick, Rio Tinto, hit $111 this month on the news of rising prices! If you bought when we first featured Rio Tinto in May at $89.60, hang on for more anticipated gains. If you're thinking to buy in now, near the ten-year high, you may find a better buy-in opportunity. Though the metals sector is not expected to taper off, the market indices may present a buying opportunity for you to get in at a better price. Threats of terrorism, mixed economic numbers and oil prices, etc. have kept investors on a share price rollercoaster this year. A rising tide lifts all ships, but a sinking tide definitely grounds them as well. It is difficult for a company to buck the downward trend, and Rio Tinto may suffer from the current downtrend of the Dow Jones Industrial Average.

Donald Straszheim, Straszheim Global Advisors likes BHP Billiton, an ADR traded on NYSE under the symbol , BHP. "It is a broadly based company that sells all kinds of commoditiesÉ all of the colored metals," according to Mr. Straszheim. BHP is located in Melbourne, Australia, an economy many U.S. capitalists are currently investing in.

BHP's stock is trading around 21. Revenue grew 43% in fiscal year 2004, over 2003. BHP Billiton's P/E is one of the lowest in the industry, the P/E to growth ratio suggests that the stock may be undervalued and institutional holdings increased significantly on October 22, 2004Ñall positive signs. NataliePace.com is adding this stock pick to our Buy List Now, at $20.64.

For a Great recap of how the markets have performed over the decades, check out

the BBC's summary at the following link:

http://news.bbc.co.uk/1/hi/business/business_basics/145986.stm

Funny Money:

Election Year Quotes

1. Suppose you were an idiot. And suppose you were a member of Congress... but I repeat myself. Mark Twain
2. I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle. Winston Churchill
3. A government that robs Peter to pay Paul can always depend on the support of Paul. George Bernard Shaw
4. A liberal is someone who feels a great debt to his fellow man, which debt he proposes to pay off with your money. G. Gordon Liddy
5. Democracy must be something more than two wolves and a sheep voting on what to have for dinner. James Bovard, Civil Libertarian (1994)
6. Foreign aid might be defined as a transfer of money from poor people in rich countries to rich people in poor countries. Douglas Casey, Classmate of Bill Clinton at Georgetown University
7. Giving money and power to government is like giving whiskey and car keys to teenage boys. P.J. O'Rourke, Civil Libertarian
8. Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. Ronald Reagan (1986)
9. Talk is cheap . . . except when Congress does it. Unknown
10. The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery. Winston Churchill

.

Wealth and Power:

By Christopher Howard, entrepreneur and internationally acclaimed results coach

What are the Secrets to Having It All?

We all have dreams and desires for our lives. Why is it that sometimes we get what we want and sometimes we don't? Why do we start out in the direction of our goals only to find ourselves off course or falling short of what we know we are capable of? And more importantly, how can we consistently accomplish the goals we set along the path to living the life of our dreams?

Christopher Howard President of The Christopher Howard Companies author of Three Steps to Wealth and Power

Those were some of the questions I began asking myself at a time in my life when I was $70,000 in debt, living in someone else's garage apartment and feeling I had few prospects for my future. I had already read all the bestsellers on personal development and taken countless seminars so I knew what to do, just not how to do it. Finally, I got so incredibly frustrated that I was spurred to take the immediate action that would change my life for good. I asked myself, "What is really the difference between those people who have wealth and power beyond their wildest dreams and those who live from paycheck to paycheck?" Because the mind always seeks resolution, that one unanswered question sent me on a quest to study the great leaders in every field, from billionaire Richard Branson to Martin Luther King, Jr. From my research I developed my system of Speed Modeling™, which allows anyone to replicate the results of those high achievers they admire most.

Most people go through life believing they have to cope with themselves as they are and life as it comes because, "That's just the way it is." The scientific fact is, reality is subjective and therefore, you can actually create your life however you want it. You can forever transform the aspects of your personality and behavior that no longer serve you. The answer to the questionÑwhat sets successful leaders apartÑis their mindsets, attitudes, strategies, behaviors, beliefs, and values. I developed Creation Technologies™ as a specific set of tools that literally re-patterns thinking on a neurological level to replicate the thinking and behavioral patterns of success. The Christopher Howard Companies were then established to give individuals and organizations that set of techniques to turn their dreams into realities and passions into profits.

It's the nature of humans to do things better, quicker, and faster. Prior to Roger Banister, running a mile in four minutes or less was considered physically "impossible." When Bannister broke the record, he also broke through the commonly held limitations of people's thinking. Now high school and college students are breaking that barrier everyday. The same thing happened when Chuck Yeager broke the "sound barrier" flying the X-1. Where there was once a thought pattern or belief "that could never be done," we have now discovered ourselves capable of flying even further and faster. Just as we are making major advances in the areas of science and technology, we are leaping forward light-years in the field of human potential. The fact is we can each break through any of our own internal "barriers" to personal power to achieve beyond what we previously imagined possible for ourselves.

How? The specific tools of Creation Technologies™, including Speed Modeling™, ask a different question. If traditional psychology is the study of "What's wrong - and why?" then Creation Technologies™ are the study and practice of "What's right - And how can we reproduce it?" If there is anyone achieving the results you desire for your own life, then it is possible for you to "download" and "install" the personality factors that made their success inevitable.

An important key to taking control of your destiny, is taking charge of where you focus your attention and time. William James, the grandfather of American Psychology, once said, "Focus is everything. It determines everything in an individual's life. My deep regret is that it seems to be too difficult to teach." Well times have changedÉ You can get in charge of your focus and therefore your results.

Athletes are masters of their focus. They train themselves to be present in each moment so that they are ready to make the best of those moment-to-moment opportunities, yet strategize the future. A soccer player running down the field towards the goalpost knows what he wants and the most direct route to it. If he dwells for even a second on the last goal he missed, he might not see that split-second opening between the two players in front of him. He not only has put a picture in his mind of what he doesn't want [another missed goal], he's missed a valuable opportunity in the present by staying in the past. This same ability is essential to success our business, financial and personal fulfillment. All of our power to create what we want is always in the present. When you learn how to redirect your focus to what you want rather than what you don't want, the possibilities for your life are as endless as your imagination.

About the Author

Christopher 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 www.universalevents.com.au

San Jose, California --Breakthrough to Success--November 5-7
New York, New York -- Breakthrough to Success--Nov. 12-14

Investor's Guide:

Tips From the Pros, to Print Out and Keep In Your Wallet.

1. Get smart. "Good investors, like good drivers, anticipate potholes, lean in on turns, have enough cash on hand to fill up the tank, and race confidently on the open road, while everyone else is sleeping." Natalie Pace, founder of NataliePace.com, "wisdom"
   
   
2. Keep it Simple, Stupid. "I don't try to jump over 7-foot bars: I look around for 1-foot bars that I can step over." Warren Buffett.
   
   
3. Buy Off Season. "Be contrarian. Buy "straw hats in January," when no one else wants them and prices are lower." Pete Colhoun
   
   
4. Beginner's Luck. "Don't confuse wisdom with a bull market." Pete Colhoun
   
   
5. Buy Low/Sell High. "Nobody likes to buy low and sell high. They like to buy high and sell higher." Ben Horowitz, CEO of Opsware, Inc.
   
   
6. Carpet Bagging. "The way to make money is to Buy When There is Blood in the Streets" John D. Rockefeller
   
   
7. Innovation. "If you want to succeed you should strike out on new paths, rather than travel the worn paths of accepted success." John D. Rockefeller
   
   
8. Popularity Contests. "Don't buy into a stock that has hit it's first high in a long period of time. Holders are going to jump ship!" Rance Mashek, President, SpreadTrader
   
   
9. The Return of NASDAQ. "Technology stocks are going to be one of the major sources of profits for a long time." Frank Husic, Husic Capital Management
   
   
10. Research. "If you don't study any companies, you'll have the same success buying stocks as you do in a poker game if you bet without looking at your cards." Peter Lynch

From Divorced and Desperate to Dream Come True :

by Natalie Pace, founder and CEO of NataliePace.com.

Divorce sucks. Your dreams are shattered. Your expenses double. Guilt. You're afraid that only creeps get divorced (that's your new dating pool, plus, you're one of the creeps). To make the situation worse, you probably can't afford your home anymore.

Unfortunately, it is during a crisis when most of us start thinking about our finances. When you're swimming happily through life, why open 401K statements? They're not bills after all. You can file them directly in the cabinet without fear of debtor's prison.

It might surprise you to learn that the average age of widowhood is 56 (Waddell & Reed, 1997), or that 33-39% of married couples will end up divorced within ten years (National Center for Health Statistics). When a life crisis comes at you, and it will, you will feel so overwhelmed with responsibility, fatigue, hopelessness, time constraints and grief that the temptation to trust in strangers on serious and consequential matters will feel like a matter of necessity. In fact, that is the time to trust your instincts most. That doesn't mean all of your choices will pan out perfectly, but you will be on the right path.

Teaching! I thought. I'll be home for my kid after school! How naïve I was. When you consider that teachers don't get paid to be at school early, or to stay late and grade papers into the middle of the night, my caregiver was earning more per hour than I was.

Within two years of teaching, I was so far behind on my bills that the county was threatening to put a lien on my one asset--my condominium--in order to collect the property taxes that I owed. My credit card debt had blossomed into a nuclear waste dump that I stored on the top of my refrigerator--so toxic that it made your eyes bleed just to pass by. Needless to say, I was an emotional wreck, and I could only approach the nuclear fallout of which bills to pay, which companies to plead with and which to completely ignore on the nights when my son went with his father. How could I let things get to this point? What kind of world expected me to work all day to pay basic necessities without having a latchkey kid who turned to drugs or television for comfort?

Complaining doesn't pay the bills. I got an executive level position at a nationwide phone company. The salary was double that of a teacher's and the hours, though longer on paper, were MUCH less.

At the same time, the wonder of investment cycles began to work in my favor. In 1998, at the time of my divorce, I was locked into a home that I couldn't afford, couldn't sell, and couldn't rent. Real estate had been depressed for most of the 1990s, and my mortgage was underwater, due to a series of Los Angeles disasters--the Rodney King riots, the Malibu fires, mudslides and the Northridge earthquake. (Diversify!) Things were so dire, that, in 1994, you could have bought a home north of Montana for $750,000. (In 2004, you couldn't buy a termite-ridden hut for under $1.7 million.) By spring 2000, however, the Los Angeles real estate market came roaring back. I borrowed money, gave my crappy little condo a new coat of paint and new carpets and sold it for a small profit.

Burned for nine years by real estate, I turned my eye to Wall Street. You could have thrown a dart at a wall full of stocks and found a winner in 1999, and cocktail parties were abuzz with people touting their gains.

On a breezy Santa Monica lunch period, I met with Steven Snappy, a certified financial planner, NASD and SIPC. Steven drew up a pie chart telling me that if I tossed my real estate profits into a bowl of mutual funds, and dumped in an additional $500/month, that I'd churn up a minimum of 12-15% return. "That return," he said in a whisper, behind a cupped hand, "is VERY conservative." (Never mind that I'd have to give up eating to afford the $500 per month!) His mutual fund brochures (which I still have) boasted up to 43.24% returns on funds anchored by AOL, Global Crossing and Enron, to name three. These brochures quoted returns from March of 2000, at the stock market high, something Mr. Snappy neglected to tell me, even though our meeting occurred in September of 2000, after NASDAQ had already tumbled about 40%.

When I met Steven Snappy, I thought P/E was the company in Erin Brockovich. I had no idea what Cisco did. I did know, however, that the telecommunications companies were overbooking revenue. I was on the phone daily trying to get hundreds of thousands of dollars worth of credits from a major company that had been over-billing my company at triple the contracted rate for ALMOST A YEAR. If telecommunications companies were cooking the books, what other companies were doing it?

Steven Snappy became very impatient with my questions. It was perfectly easy to see from his charts that the mutual funds he was recommending were amazing! By diversifying, I would be protected from the fluctuations of any one sector. How hard was it to see that! Besides, he was making a HUGE, UNAUTHORIZED exception for me by lowering the minimum buy-in. If my money sat in savings at 4-5% interest that was less than inflation. We were talking TEN times GAINS in upside potential! Just what was it that I didn't understand? (If you ever hear someone talking to you like this, remember s/he is a SALESMAN, not an investment genius! RUN!)

There I wasÑa professional woman in sharp, new clothes, who had a pen poised to sign a slew of documents that I didn't believe in because I wanted some sleazy salesperson to approve of me! Think fast!

Gore was campaigning on eight years of prosperity, and how he was going to be the candidate to continue it! "Not with less than 50% of the vote," I thought. It didn't matter whether Gore or Bush was elected, over 50% of the nation wasn't going to be happy about it. In fact, who could continue eight years of prosperity? And didn't it take a few years for the rookie in office to figure out how to get anything done? How could technology companies, like Amazon.com, operate for YEARS in the red? Too many red flags.

Mr. Snappy kept calling, nagging me to sign the documents. I was too busy researching the P/Es, P/E/Gs, Debt/Equity ratios, and 10-Ks of my favorite companies to take his call. I didn't make much money in 2000 in interest, but cash turned out to be the top performing asset class of the 2000 recession. Since then, I've had extraordinary gains in the markets, and founded my own multi-million dollar company.

I'm thrilled that I didn't lose all of my money with Steven Snappy, but the most important gain that I received that year was confidence. When you have nagging doubts, that is your heart begging for more information. Trust that your uneasy spirit knows something. By prospecting into the heart and soul of your concerns, you will discover USEABLE INFORMATION, and knowledge and wisdom is always the best place to make decisions from. Interesting that the first place I found gold was in my heart and intuition. Bet on your heart and prosper.

This chapter is from the book, Inspiration to Realization, compiled by Christine Kloser. If you wish to order the book, which includes the inspiring stories of over 40 incredible, successful women, contact Christine Kloser at:

Love Your Life
PO Box 661274
Los Angeles, CA 90066
Ph: 310-745-0794

christine@loveyourlife.com

If you want to start watering your money tree with wisdom, NataliePace.com is currently offering 30% off our subscription rates. So, for less than one night on the town, you can get smart all year about real estate, stocks and bonds, have access to our stock picks (which are significantly outperforming the market indices) and chat one-on-one with the financial consultants and money managers of millionaires. JOIN NOW and receive a bonus gift of Smart Math software to track all your capital gains. (Does the math for you.) Cost: $54.00 (value: wisdom is priceless)

VISION: To build a global community of investors through a worldwide website, seminars, radio, television and print partners.
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