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*Big Shifts & Sector Rotation*
"He proposed to me three times before I understood what he was asking"
Mrs. Alan Greenspan (Andrea Mitchell)

Everyone will be watching for monetary policy shifts this year as Alan Greenspan retires and Ben Bernanke now takes control as the new Federal
Reserve Chairman. If you believe as I do that everything moves in cycles, it appears that we are at the beginning of a long slow rise in interest rates. History suggests that rates have a rising bias, then a declining bias for 20 years at a time.

The last 20 year interest rate trend pushed rates to 45 year lows, completing two long cycles of roughly 20 years each. If history repeats itself as it has in the past, then a trend reversal (rising rates) which began a year ago is now
underway and could continue for many years into the future before peaking.

So how can investors prosper from these big shifts underway? Buy high quality companies when their shares are substantially below fair value, and revenue/earnings are rising rapidly. What creates these attractive discounts?

*THE THREE FORCES THAT CREATE FALLEN ANGELS*

1. *The business and economic cycle*, with the average economic cycle lasting approximately 4 years. Different industry groups will expand or contract depending on where we are in the cycle. Many high quality sectors and stocks temporarily become Fallen Angels when they are effected by recessions specific to their industries.

2. *Recoverable calamities* can create wonderful opportunities for bargain hunters looking to get an otherwise solid company's stock when it has become a Fallen Angel, due to panic selling. Recoverable calamities often occur when a large profitable, growing enterprise is threatened by a one-time unforeseen loss which, when publicized causes
panicky sellers to exit at or near a bottom. Eventually, the company returns to its old levels of earnings growth, propelling the stock price higher.

3. "*Market crashes and panics"* is the third force that creates opportunities. When prices plunge because everyone is fearful, even the highest quality companies can be temporarily marked way down. Panics and crashes are relatively rare, making it unwise to wait for them before investing. But when they occur, even the healthiest companies can become Fallen Angels, if only for a short time.

*Capital Spending Boom!*

Oil companies that experienced huge profit and revenue growth have announced big capital expenditure budgets for 2006, with Chevron & Shell increasing their capital spending at double digit rates. Increased spending on drilling and constructiion is expected to result in greater demand for steel, basic materials, and technology. While many investors
have been putting money into the big oil stocks, it's now time to buy the beneficiaries of the coming spending boom.

Several former Fallen Angels we've highlighted in the past already appear to be benefiting from this capital spending spree. Just recently we suggested Seagate Technology (STX), Oracle (ORCL), and several years ago, Nabors Industries (NBR). Here are some new candidates to consider now.



Consider Intel (INTC). New high powered chips are needed for interconnected electronics. Forget about Intel's old highs above $70. I like it for a 50% potential to levels above $30.

Consider Cisco (CSCO). The world's leader in network routing and switching has a competitive advantage for those companies with cash to spend on infrastucture. Forget about Cisco's former highs above $80. Patient investors have 50% upside potential.

Consider Conexant Systems (CNXT). A turnaround play in broadband communications infrastructure, ignore the old nose-bleed highs above $100. That bubble deflated, and the stock now appears undervalued by roughly half. Conexant expects to be profitable again soon. It's experienced substantial revenue growth recently, and analysts like it again. Upside potential above 50%

Never make any one stock more than 2 to 3% of your portfolio, and remember that we will not be telling you when to sell. Profit taking and risk management is something we do on a discretionary basis for our managed accounts. Another Bulletin will be coming your way shortly.

Best Regards,

Gabriel Wisdom
GWISDOM@AMMINVEST.COM

The opinions expressed are those of Gabriel Wisdom and do not necessarily reflect the opinions of American Money Management LLC (AMM), an SEC registered investment advisor www.amminvest.com. Clients, Mr. Wisdom, and employees of AMM may buy or sell investments mentioned
without prior notice. Prices are as of the close on 2-1-06. This Bulletin should not be considered investment advise. The opinions expressed do not constitute a recommendation to buy or sell securities. Investing involves risks, and you should consult your own investment advisor, attorney or account before investing.

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