CI Outlook - Archives

Newsletter - 4th Quarter 2001

January 8, 2002

Mr. and Mrs. Investor
123 Elm Street
Dallas, Texas 72345

Dear Investor,

Goodbye and good riddance to 2001.  More importantly, say goodbye to the bear market of 2000-2001.  After two long years of overvalued down trending bear markets we hope to welcome back the bull.  You may recall we said, in our quarterly letter of September 2001, we thought there was a good chance the market had bottomed.  It appears we were correct and a new bull market has been born.

Born out of the panic of September, this is a young bull and it could have a long life.  But as with all successful bull markets, this one too must climb the proverbial “wall of worry”.  Therefore, we need to be prepared for bad news in the coming months.  This could be news concerning the economy, the war effort, or any other matter of importance to investors.  As we listen to that news we must remember that last years market discounted it.  So, no matter how bad the news seems, remember the severity of the previous decline and assume it discounted just about everything but the end of western civilization.  A review of the record will illustrate the bear market damage.  From it’s high in March 2000 to the September Lows of 2001 the NASDAQ fell 72%, the S&P 37%, and the Dow Industrials 30%.  Two-year declines like these have not been seen since 1973-1974.

Last years decline was particularly frustrating for investors.  The NASDAQ down 39% already in 2000 fell another 21% in 2001.  And according to Lipper Analytics, in 2001 the average mutual fund was down and additional 11%.  Severe multi-year slumps like these are very discouraging to most investors.  This decline was one of those.  After big declines the biggest mistake most investors make is a failure to recognize the change in market direction.  Today we believe the trend of prices in the stock market has changed.  We think the trend is up and we know from experience that those stocks that led the last bull market will not lead this one.  In new bull markets, such as this one, different companies in various industries will take over as market leaders.  We hope to ferret out those as yet unknown leaders and invest in them, ahead of the crowd.

As always we will be mindful of your investment goals as we position your portfolio for the future.  Once again we want to thank you for your continuing patronage.  We look forward to working with you in the New Year and hope to talk to you soon.

C. J. Brott, Jr.                                                                                     Karen Burns


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