Investor's Corner Newsletter

By Will W. Woodard, III, CFP®
President, Dare Capital Management & Advisory
October 23, 2005

"Aim for success, not perfection. Never give up your right to be wrong, because then you will lose the ability to learn new things and move forward with your life."     Dr. David M. Burns

Model Portfolios Update-Market Snapshot
Talking Points-Creative Destruction
2005 Winners and Losers
Charts-S&P 500, Ten Year Treasury Note
Worthwhile Links

Model Portfolio Update - The model portfolios that I track on an ongoing basis performed as follows from inception date of 1/15/03 through 10/23/05. (Note: portfolio data is compiled using Morningstar resources. All data includes reinvested dividends and, if applicable, capital gains)

*2003 data is from 1/15/03
**trailing 12 month yield=4.30%

Market Snapshot: Investors who are attuned to the historical performance of the US equity markets will remember that April and October have the reputation of being two of the worst market months of the year. This nasty seasonality goes at least as far back as the Great Depression, started as it was by a crash in October of 1929. This year has played out true to form as well, dropping YTD gains (as of 9/30/05) of 11.29% for the Pure Portfolio, 14.29% for the Modified Portfolio, and 14.20% for the Challenge Portfolio to the returns posted above. Thus it is against a more-than- figuratively tracer-lit sky that I file my latest dispatch.

Since my last report the US economy has endured catastrophic hurricane Katrina and several other very strong storms, a spike in oil and natural gas prices, a possible world-wide Avian flu pandemic, signs of a slowing housing market and creeping inflation (especially in wholesale producer prices), and a Federal Reserve that continues to raise short-term interest rates to combat said inflation. The Fed Governors appear to be embarking on a policy of increased verbal economic rhetoric, talking publicly about the US economy at an unprecedented pace. This new jawboning policy (if that is what it is) has not been that well received thus far by the markets.

October is also mutual fund end of year selling season, and there is a developing fraud case at a large broker and futures trading firm, which has especially impacted energy issues over the last several weeks. All of these distractions taken together could be ingredients for a big fat recession, or stagflation, or the sky falling, or the return of communism, or…well, fill in the blanks with YOUR worst-case scenario. Suffice it to say that it would be wise to keep a vigilant eye on the bond market!

Creative Destruction: Built as they are on the nested concepts of free enterprise and creative destruction, capitalist financial markets will turn on a dime to expose, contemplate, and ultimately rationalize worries (real and imagined) of all different sorts. For investors with a longer-term perspective, the seemingly manic and emotional gyrations of the market in the short-term can be distracting and can cause fear and doubts regarding investment strategy to surface.

Below the emotional surface cross-chop, however, creative destruction serves a terrific purpose, clearing the free-enterprise landscape of a non-competitive company in a sector (Google "Trabant" or "Zayre"-among others-for more color on this), reconciling US Government policy that will affect publicly traded companies, or conducting ongoing "discounted future value" modeling for promising new science applications or technologies. Like forest fires that clear land and, ultimately, allow rebirth for wilderness areas, creative destruction is a powerful tool of free markets.

2005 Year in Review: Winners and Losers-2005 is on track to be a good year in the equity markets, even though the month of October has been difficult. Here are several of 2005's winning and losing investment themes.

Winners: Emerging Markets International. Led by the performance of countries such as Brazil, South Korea, and Hungary, the IShares Emerging Markets Index (EEM) was up 14.66% YTD as of 10/23/05.

Winners: Oil, Natural gas, commodities, natural resources. These sectors of the market have continued the strong performance that was first highlighted in the Spring 2004 edition of this column. (http://www.darecapital.com/news/040227_news.htm) For example, the PIMCO Commodity Real Return Index, (PCRDX) a broad basket of commodities, is up 18.83% YTD for 2005.

Winners: Selected technology companies. Apple Computer (AAPL)-up 72.9% YTD for 2005, Sandisk (SNDK)-up 126% YTD for 2005, Google (GOOG)-up 76% YTD for 2005, and Motorola (MOT)-up 21% YTD for 2005 are examples of technology stocks that have done very well so far in 2005.

Losers: Merck and Pfizer: Merck (MRK) is down 15.5% YTD for 2005 and Pfizer (PFE) is down 19.3% YTD for 2005. Lawsuits, competition with nimble rivals like Genentech (DNA) and Amgen (AMGN), and slowing pipelines of new products have these two drug-making giants back-peddling.

Losers: Ford and GM. Ford (F) is down 42.3% YTD for 2005 and General Motors (GM) is down 26.3%. High gas prices, high steel prices, slowing customer demand for gas guzzling SUV's, and having to deal with the United Auto Workers Union (don't start with me on unions!) have created a seeming perfect storm of pain for shareholders in these two concerns.

Charts:

S&P 500:

10 Year Treasury note:

Worthwhile links:

CERTIFIED FINANCIAL PLANNER™ Board of Standards - http://www.cfp.net/default.asp

NAPFA, the National Association of Personal Financial Advisors - http://www.napfa.org/

The Financial Planning Association - http://www.fpanet.org/public

The FPA's Hampton Roads chapter - http://www.fpahamptonroads.com/

Dare Capital Management & Advisory home page - http://www.darecapital.com/

Good Investing,

Will W. Woodard, III, CFP® is president of Dare Capital Management & Advisory, a Registered Investment Advisor firm with offices at 2518 S. Croatan Hwy, Suite E, Nags Head, NC 27959. Dare Capital Management & Advisory offers ongoing fiduciary investment management services on a fee-only basis. Mr. Woodard, his firm, or his clients may own the investments mentioned herein. Contact Will at (252) 480-0156 or learn more about the firm at www.darecapital.com www.darecapital.com

The fine print: This newsletter can be reprinted or forwarded--however, it is requested that reprints of any material in this newsletter include credit to Dare Capital Management and Advisory (252)480-0156 and an email link to will@darecapital.com. Thanks for spreading the word!

All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Will W. Woodard, III and Dare Capital Management and Advisory, and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. Mr. Woodard, his firm, or his clients may own the investments discussed in this newsletter. Past performance is no guarantee of future returns.

The information presented herein and the company's web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future results may vary for many reasons.

Copyright 2004 Dare Capital Management and Advisory-all rights reserved.