November 2002

~Investment Advisory Bulletin~

A Glimmer of Hope?

Following six consecutive down months, the all-funds-average for October turned positive. Since the beginning of the bear market 31 months ago the average mutual fund has lost 27% of its value – a staggering amount. However, the losses in the technology funds were vastly greater at a 76% decline. The other standout statistic in the past 31 months has been the decline of growth funds of 48%, while value funds actually appreciated 1.1% in the same time.

	August 2002	September 2002	October 2002	31 Months
All Funds	0.4	(8.3)	5.4	(27.0)
Technology	(1.5)	(14.4)	17.0	(76.4)
Fixed Income	1.7	0.8	(1.8)	19.8
Growth	(0.4)	(7.7)	6.5	(48.5)
Value	1.0	(8.8)	4.4	1.1

Is this the beginning of the end of this bear market? To my count it is the third time that I hopefully thought that the bear market would be coming to an end. However, other people have noted that this is approximately the length and depth of the bear market of 1973-74, the last protracted bear market that we endured. Several commentators are cautiously encouraging clients to slowly increase their equity positions. At this point I continue to advise holding a diversified portfolio with roughly equal equity and income positions and a portfolio with both growth and value investments. Each month sees a different fund type and a different fund style take leadership. Rather than trying to predict the unpredictable, all that I think that we can do is to remain diversified so that when the market does come bounding back you are in a position to bound with it. We should continue to prune the weaker funds out of your portfolio and replace it with funds that are doing better more recently.

I will continue to monitor your portfolio. Please call me whenever you have concerns or if you have added considerations. From all of us at Werner & Co., I wish you the best for the holiday season!

-Roger D. Werner