PERFORMANCE ANNOUNCEMENT

As Of: April 16, 2002

Show Me The Earnings

    It seems that all the stock market investors have moved to Missouri, the "show me state". They no longer take it purely on faith that stock prices will always move up. They want to see the earnings, and they want readable financial statements so that they can determine if the earnings are real. This is a refreshing return toward sanity after the hype and hoopla of the past decade. However, I still can't help but wonder how many people are independent thinkers and can determine real value for themselves. Watching price patterns in the market is like watching a school of fish darting back and forth. One day there is a 200 point drop in the Dow as the longs are sent into a panic, and the next day there is a 200 point rise as the shorts are squeezed. One would think that after the past two years' adventure with the NASDAQ, stock would have moved into stronger and wiser hands. But there is still little appearance of real conviction as large blocks of stock are traded back and forth like baseball cards among prepubescent youth.

    The recent pattern has been up, down, up, down. It doesn't take much imagination to suppose that the next move will be up and then down. Simplistic? Yes. But the market went down over earnings worries, and will probably go up with relief that earnings aren't as bad as imagined. Then it will be natural to worry whether earnings will continue to get better in the second quarter, or is this just a bounce? The good news is that we have already had a lot of bad news and the market hasn't totally collapsed. The bad news is that the market still isn't cheap, and its upside is therefore limited. The conclusion is that we are going to be in a broad trading range for a while. The market has been moving way to fast and is ahead of reality. The market needs to sit in a trading range while enough time passes to allow reality to catch up.