CI Outlook - Archives

Newsletter - 2nd Quarter 2002

July 9, 2002

Mr. & Mrs. Investor

123 Elm Street

Dallas, TX 98765

 

Dear Mr. & Mrs. Investor,

“In the short term the stock market is not logical but psychological.”

This quote, attributed to Jesse Livermore, a famous turn of the century trader, rings true even today.  It is a way of looking at the present market and perhaps understanding the current disconnect between the market and the economy.  With few exceptions economic expansions have been led by rallies in the stock market.  The last exception was at the outbreak of World War II.  Then the economy roared forward but the stock market remained mired in doubt.

Apparently the outbreak of the war on terrorism will be the second exception in modern times.  Since last summer we have believed the economy would turn in the fourth quarter and strengthen. It did.  However, while the economy continues to rise the markets continue to fall.  Obviously participants in the market are again mired in doubt.  The uncertainty may be due to worries about the war, accounting scandals and deficit spending or any number of issues currently in the headlines.

We continue to believe the main danger to the market is not a headline but a lack of capital spending.  We persist in the belief that business managers will spend on capital equipment when they are confident in their profitability.  This quarter is an important part of that outlook.  As we enter this earnings season we are hoping to see the trough in corporate earnings.  And, along with corporate earnings announcements, we are looking for positive projections about the future.  Should things work out this way we think the worst for the market is over.  Along with slowly rising confidence should come a rising stock market.  If this is not the case we will take appropriate actions to realign your portfolio with our updated viewpoint.

As always, we will be basing investment decisions on our market outlook combined with an awareness of your investment goals.  This month would be an excellent time to review your investment goals.  Please contact us to set up a convenient time to meet either by phone or in person and review your account.

 

C.J. Brott, Jr.                                              Karen Burns


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