August 23, 2002

MARKET SEASONALITY

Once again, August is proving to be a slow month with activity in the market limited by lower volume on any market movement. September and October are likely to show a sustained reversal of August activity. Meanwhile, with the economy continuing to show weakness and the latest reports indicating that the European Community also is experiencing sustained economic weakness, there is little positive information to buoy up equity prices in any meaningful way. On a seasonal basis, September and October have historically been weak months for equities in general. The Federal Reserve held interest rates steady at its latest meeting, although admitting that business activity was weaker than expected and that signs of further weakness were beginning to appear on the horizon.

We expect that the Federal Reserve will reduce the Federal funds rate by 25 to 50 basis points at their next scheduled Federal Open Market Committee meeting on September 24th. This would be an attempt to reflate the economy and jump-start equity prices higher thus encouraging consumers to begin spending once more. Because of developing weakness in the housing and construction sectors of the economy, it is unlikely that these elements will provide the stimulus that housing provided in the recent past. In summary, the economy continues to look weak in our opinion and caution remains the order of the day.

August 8, 2002

"THE BENDS" IN THE MARKET

The volatility of the market continues to increase with the major market averages rising and falling by 200 and 300 points with no discernible trend in evidence. With the economy continuing to weaken and the proffered improvements in activity fading away, the probability of higher profits in the corporate sector is vanishing. When this realization becomes generally know, many investors are likely to further reduce their equity holdings to more conservative levels. We continue to recommend a conservative investment posture in the face of an uncertain business environment.

Commonly referred to as "decompression sickness" in the field of diving, one could use the analogy that a market rising too quickly [a rally] after a long and deep descent [bear market] is likely to experience something similar to "the bends." As one rises from the ocean depths and pressure on the body decreases, nitrogen is dissolved in the body and forms bubbles. Ascending too quickly will not allow the body to assimilate these changes and will cause severe cramping and, in rare cases, even death. To prevent getting "the bends" it is highly recommended that one ascend slowly, breath continuously and pause every so many feet for a period of time before continuing toward the surface. It is also recommended that one not go deeper than one feels comfortable. This advice also is sound for investors.

A volatile market that rises and falls rapidly can be a painful experience. This is not the time to rush into the market just because CNBC commentators are excited about the latest BEAR MARKET rally. There will be ample opportunity to buy after the BEAR stops growling. At that time, investors should proceed slowly and not attempt to pick the absolute bottom. Half a century of experience suggests to us that that time has not yet arrived.