PERFORMANCE ANNOUNCEMENT

As Of: February 20, 2002

Betwixt And Between

Volatility = Opportunity

    The recent volatility in the stock market implies that many investors are confused. At least that is the common wisdom. I would like to clarify for you, the reader, what is happening; but that would be a largely futile exercise. (You aren't going to make any money by trying to figure out what is driving the markets right now.) I am not at all confused. I know where we have been, and I feel quite certain about where we are going. The current turmoil will pass, and it isn't worth dwelling on except to say that sometimes you have to simply take what the market gives you. Now is not the time to swim against the current or try to be a hero. Now is a time to stay flexible, stay afloat, and lay plans for the future.

    We have been, and are, in a bear market. Eventually the market will start going up again. It doesn't take any special talent to figure that out. Most people want to know exactly where the bottom is so they can safely reinvest. Wishing won't make it so, and it is a misguided desire in the first place. It is far more constructive to think about why a person would want to own a company in the first place, and then search for the opportunity that matches the right criteria for ownership.

    It seems clear to me that companies in the merchant energy business have been punished unmercifully because of the Enron situation. Certainly they aren't all going to go broke. There are probably some great opportunities in this group. The telecom and networking companies have also been trashed. Certainly some value can be found here. On the other hand, the home builders' stocks at year highs (and related businesses) don't look like a bargain. Personal bankruptcies hit a record in 2001 and are expected to set a new record in 2002. Semiconductor stocks have also had a tremendous run up and don't look cheap. We are at a place in the market cycle when it is necessary to do your homework and use some common sense. Stocks are in the process of passing from weak hands (confused, ignorant, momentum players) to strong hands (people who have a reason to buy and the conviction to hold on). Some stocks are also being dumped because they simply aren't worth their current price (and in some cases aren't worth any price). This is an entirely normal sorting out period.

    So be happy that opportunity has presented itself to you, and make something of it! By the time that order has returned and the press can rationalize the direction of the market (either up or down), much of the opportunity will be gone. Now is the time to lay plans for the future and to act on those plans.