throughout January. The  daily suicide bombings in Iraq in January seemed to fuel the "terrorist fatigue" of investors, who paid little if any attention to it.

February began and ended as a tug of war between the bulls and the bears. The bulls continued to prognosticate that the  economy would rebound, the bears, that it would deteriorate.   

Moreover, the employment report  released in early February  for the month of January disclosing the creation of  a scant 100,000 new jobs was fuel for the bears (most economic pundits including the Bush administration's own economic report predicted that 200,000 jobs a month would be created each month in 2004 in this country).

Most stock market indexes closed the month of February  where they had started, up slightly for 2004.

The bond market mirrored the stock market throughout February as bond prices barely budged that month.

The bears regained the upperhand as March unfolded sending many stocks on a free-fall.

Investors focused their attention once again on the terrorist threat on March 11.  On  that day more than  one dozen bombs were remotely detonated on commuter trains in

Spain, right outside of Madrid.

Most investors had pushed the terrorist threat aside in the U.S. in the past few months, even though the U.S. has remained under "yellow alert" status.

The bombings in Spain on March 11 to their railroad system  produced more than 2000 casualties and killed almost 200 people.

This horrific event however, sobered up stock investors in the U.S. realizing that the 140,000 miles of railroad track on U.S. soil were virtually unprotected from terrorist attacks.

Moreover, when it was determined by the Spanish government that the culprits that were responsible for  the carnage in Spain were "Al Qaeda" and not a local terrorist group, the stock market in the U.S. began a free-fall.

Exacerbating the stock market decline in early March was the employment report released for the month of February that disclosed that only 21,000 jobs were created for February, much less than the  economists   had predicted.

The bond market rallied aggressively (yields declined) the day that the February employment report was released.  Bond investors have been concerned over the past few months that the Federal Reserve (Fed) might raise short-

term interest  rates if job growth becomes  robust to thwart any inflationary pressures that might be building in the U.S. economy.

Bond investors abhor the concept of inflation as it erodes the value of the interest payments that they receive owning bonds.  The February employment report mitigated any fears of bond investors that the Fed would raise interest rates any time soon.

March ended with most major stock market indexes in negative territory for 2004, giving up all their positive gains for January and February of 2004.

I continue to be cautious about the fragile economic recovery in the U.S. that faces many headwinds. These include but not limited to; the anemic labor market; the heightened threat of global terrorism; and the historically high valuations of many stock prices.

Therefore, I am heavily weighted in short-term investment grade bonds and under weighted in stocks in the portfolios that I manage for my clients to protect their vital assets from a stock market meltdown.

I remain committed to energy, gold mining, and commodity based stocks, as the core of the stocks in the portfolios that I manage for my clients.