Worrying is like a rocking chair, it gives you something to do, but it gets you nowhere. (Glenn Turner)

At a recent conference I had the opportunity to meet the former presidential candidate Steven Forbes. I also met Nobel laureate Bill Sharpe. Sharpe invented the Sharpe Ratio, a way to evaluate the risk-reward tradeoff on a stock or fund with a single number. Sharpe invented style analysis, (value, growth) a way to use mutual funds returns to explain their behavior. Sharpe won the Nobel Prize for economics in l990 for inventing the Capital Asset Pricing Model in the early l960�s. This model explains the volatility of a stocks systematic market risk as well as a specific companies risk, and thus laid the framework for much of Modern Portfolio Theory. When I began my undergraduate degree in finance in the l970�s, I studied Bill�s work. When I finished my Masters in the l990�s, I was again studying Bill�s work. The analysis I do on an everyday level comes from Bill�s work. It was a great honor to meet this man and glean his insight on the current market conditions and the outlook for the market in 2003.

My brief tirade�

The market seems to be in a holding period right now. The general economic data released is showing favorable signs of recovery. However, the market is skittish due to terrorism at home, political unrest and corporate scandals. We seem to be waiting for the next announcement of accounting restructuring or �the next shoe to drop�. The summer doldrums are upon us.

What do Enron, World Com, Tyco International, Xerox, ImClone, Dynegy, Adelphia Communications, Merrill Lynch & Co, Global Crossing and Computer Associates International all have in common? They have had many visits by the SEC and some should have their Boards of Directors sharing a jail cell. I am disgusted by the amount of corporate fraud that has n taken place among some to the top corporate executives in the US. I think the Boards of Directors should be held accountable for this fraud and many of the executives should be charged with fraud and prosecuted to the fullest extent. I wish the SEC would investigate each company that has loans outstanding to board members in excess of $250,000. It is unbelievable that many of these companies loaned millions of dollars to their board members, then filed bankruptcy and collapsed. The president of World Com had an outstanding loan of $400 million dollars. It is disgraceful.

�One of the major reasons why people are not doing well is because they keep trying to get through the day. A more worthy challenge is to try and get from the day. We must become sensitive enough to observe and ponder what is happening around us. Let life and all of its subtle messages touch us. Often, the most extraordinary opportunities are hidden among the seemingly insignificant events of life. If we do not pay attention to these events, we can easily miss the opportunities.� Jim Rohn

The All Weather Investment Approach

Investors are like sailors on a long voyage. They should want to take that voyage on a well-engineered ship with a captain and crew who follow time-tested principles and have a disciplined decision-making process. Since the ship will not be able to dock in a safe harbor each night, it must be able to ride through the storms and high waves that come its way. The captain and crew must try to anticipate the weather and storms to the best of their ability to make sure the ship allows for a long successful voyage.

The point of investing is to put money to work today in order to get more back tomorrow. We are trying to build a sturdy ship capable of successfully sailing a long voyage with an experienced crew and a cargo that includes a mix of industries and companies all selected for their value. Of course, we can not know exactly how successful the trip will be. However, following an investment discipline day after day should help assure that the cargo will grow in value as the voyage proceeds.

The above analogy has been paraphrased from Shelby Davis, of Davis Advisors. He described the journey we are on, so perfectly, I wanted to use his example. It is a long journey that tests our patience, beliefs and ability to stay the course, with no safe landing in sight. The captain and crew we have chosen are all experienced mutual fund managers that have been through the rough seas before and will be able to guide us to a successful destination, given the time to weather it through. I, too, am tired of wearing my life jacket but am confidant that the seas will calm, so I continue to look ahead.

House Passes Permanent Estate Tax Repeal

On June 6, the House passed a bill (H.R. 2143) that would make permanent the estate tax repeal provision in last year's tax cut law. H.R. 2143 repeals the sunset provision in last year's tax cut law that would reinstate the estate tax after December 31, 2010. Making the estate tax repeal permanent is projected to cost the federal government an estimated $99 billion in lost revenue over a 10-year period. Democrats offered a substitute amendment to permanent repeal of the estate tax. The Democratic alternative sought to increase the exemption amount for individuals to $3 million and $6 million for couples by January 1, 2003, and was estimated to cost $5.3 billion over a 5-year period. This proposal, however, failed to obtain the necessary votes for final passage.

H.R. 2143 now goes to the Senate for consideration and is likely to face opposition. There is discussion among senators to combine the estate tax repeal bill with other permanent tax cut provisions such as marriage tax relief and the exclusion from federal gross income for payments made to victims of the holocaust under the Nazi regime. The debate promises to be lively.

Think ahead and look ahead. Focus on the positive and the future,


Sandra C., Field, CSA, MBA, CFP