February 20, 2002

Inflation Pulse

The Labor Department reported that its closely watched Consumer Price Index (CPI), rose 0.2% in January, following a 0.1% decline in December 2001. The core rate of inflation, excluding food and energy prices, also rose 0.2% in January. On a year-over-year basis, the CPI increased at 1.1% - the smallest year-over-year increase since 1986. Among some of the components, the following changed by the indicated percentage.

Meanwhile ..............

2001 - "Boom Year for Bankruptcies"

The American Bankruptcy Institute (ABI) reported that bankruptcy filings in 2001 rose 19% to a record high of 1.49 million, compared with 1.25 million bankruptcy filings in 2000. Samuel Gerdano, executive director of the ABI said "The combination of record levels of consumer debt and an economic downturn beginning in 2000 caused more families to face financial stress than ever before". Despite some modest signs of an economic recovery, we believe that it will be several years before the mal-investments and misguided optimism is finally wrung out of the economy (and equity markets) and a soundly based expansion begins.

February 7, 2002

Precious Metals Move

The recent action in the gold market reflects the fragility of the gold bullion and futures markets. Many foreign investors, fearing a possible weaker dollar, yen and euro in the months ahead, and without attractive options, have elected to seek a safe-haven in gold. Consequently, the move by gold above $300 per ounce this week reflects its historical reserve asset role as well as that of reserve currency under present circumstances. The flight to gold also is influenced by central bank lending and the worsening need of borrowers to obtain the physical metal when another promise to deliver the metal in the by-and-by is no longer acceptable by the lenders.

February 1, 2002

Today, the Labor Department reported that the nation's unemployment rate fell to 5.6 percent in January - a decrease of 0.2 percent from December's jobless rate of 5.8 percent. Job gains in the retailing, air transportation, finance, insurance and real estate sectors helped to more than offset the 89,000 manufacturing jobs that were slashed in January. Noticeable declines in the manufacturing sector included: transportation equipment, aircraft factories and motor vehicle plants. [The trend in losing better-paying manufacturing jobs continues, albeit at a slower pace than in previous months.] Cautious should be ones' position in interpreting January's improvement in the employment figures, given the large seasonal factors that typically occur around the holiday season. Still, a slowing rate of job eliminations is a positive sign; job losses averaged over 300,000 a month towards the end of 2001. We do not expect a quick reversal in employment trends during 2002, although a gradual improvement may be in the offing if the economy begins to expand toward the 2nd half of the year.

Mutual Fund Assets Update...

The Investment Company Institute reported that the assets of the mutual fund industry rose to $6.97 trillion at the end of December 2001, an increase of $37.9 billion from the close of November. Stock funds experienced a meager net inflow of $3.04 billion in December, compared to a net inflow of $15.3 billion in November. At the close of the year, stock funds reported total assets of $3,412.9 billion, which compares with $3,962.0 billion at December 31, 2000 - a decrease of 13.86% for the year. For 2001 as a whole, Net New Cash Flow to equity funds totaled only $32.25 billion, compared to $309.42 billion during 2000, a decrease of 89.6%. Money market mutual funds reported assets of $2,286.2 billion at the close of 2001, compared with $1,845.2 billion at December 31, 2000 - an increase of 23.9% for the year. Investors flocked to money market accounts during 2001 as equity markets punished investors who previously had been pouring funds into equities and fueling the mania that preceded the return to reality. Money market funds showed outflows of $25.63 billion in December, compared to inflows of $60.3 billion in November – a usual occurrence in December.