PERFORMANCE ANNOUNCEMENT

As Of: December 19, 2003

Santa Claus Has Arrived

After a terrific year, a holiday gift.

      The year started with fear and foreboding about the war in Iraq. But after a drop in the stock market for the first three months, the economy picked up and the stock market soared for the balance of the year. Coming into winter, it looked like the stock market was ahead of itself with new values hard to find; yet money has not found a better place to go than into stocks. The year is now ending with the capture of Saddam Hussein, more good economic reports, and another nice rally in the markets.

      When the Dow Jones Index was hovering at 9600, it looked like a stretch to get to 10,000. But then Santa Clause appeared and the Dow has managed to tack on another 2.5% above 10,000!! The surprise in all of this is that the dollar is still dropping, gold is still rising, and the bond market has not suffered a major selloff. In fact, the price of Treasuries has rallied back to the high set in mid-September -- -- this on the news that we have no significant inflation.

      While I must admit to being surprised at the strength of the stock market this year, I am sure happy it is going up instead of down! What really surprises me are the complaints and edgy Grinch-like comments that I hear almost daily. Should we pity the person who has to pay taxes because they made so much money? Should we legitimize the complaint of the person who only made 18% on their portfolio instead of 20%? Should we feel sorry for the person who failed to purchase USG on the brink of bankruptcy at $3.78 and missed the opportunity to make 600% on their money? Or how about the person who bought USG at $12 and failed to sell it at the high of $23.72, so they have only made 31% instead of doubling their money? Life is far from perfect. With hindsight, there are always a thousand ways better choices could have been made. But hey! The market is up! Maybe we should just enjoy the good times while they last.

      The biggest worry I have right now is that the market is being driven by greed, not fear. When people complain during a period when they are making money, it drives poor decision making. Greed makes people stretch too far. I sense that there are forces at work right now (supporting the stock market) which might unravel as we move into 2004. But for now, I am pleased that Santa is here. I will start to worry again when I hear the announcement that "Santa has left the building".