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major
stock market indexes about where they started at the end
of April. Buy and hold investors were on a roller-coaster
ride throughout May, while professional stock market day
traders profited from the volatile ups and downs.
Stock analysts were under scrutiny in May, and a major Wall
Street firm paid a $100 million fine to the State of New
York for dispensing less than objective stock research
and recommendations.
The "War on Terrorism" continued in earnest throughout May.
However, the news media was more focused on the escalating
Middle East crisis and the nuclear brinkmanship between
Pakistan and India facing off more than one million troops
on their borders, in their continuing dispute over Kashmir.
The escalating terrorist warnings throughout May by the
FBI, CIA, Department of Defense, etc. did little to capitulate
investors to abandon the American dream of financial
success visa vis the stock market. I guess Americans
just became jaded after a continuing barrage of constant
heightened threats hoping that the terrorism will end in
the U.S..
The stock market continued to decline throughout June as
investors continued to be spooked by the continuing in
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vestigations
of many public corporations by the SEC, as to their creative
and or fraudulent accounting practices.
The earnings announcements and pre-announcements throughout
June continued to depict lackluster profits or the continuation
of large losses by many bellwether corporations in many
sectors of the U.S. economy.
There was however, a number of major stock market rallies
throughout June. These one or two day rallies were followed
by major sell-offs, and as such, most major stock market
indexes continued to decline throughout June.
Government bonds continued to perform well throughout the
second quarter, and gained significant ground in June,
fueled by the continuing escalating middle east conflict
and the constant warning by our government as to the
inevitability of more terrorist threats in this country.
Government bonds have traditionally been a safe haven investment,
and many stock market investors fleeing the stock market
throughout 2002 embraced the Government bond market.
The corporate bond market however, especially the "high
yield" (junk bond) bond market continued to decline throughout
the second quarter, as many public corporations
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were
being investigated by the regulators for creative and fraudulent
accounting. In June Worldcom admitted to fraudulent accounting,
as it misstated its profits for the last year and one half
by almost 4 billion dollars.
Investors remained spooked throughout June, and the second
quarter ended with most major stock market indexes at their
lows for 2002.
The NASDAQ was the biggest loser in the second quarter,
losing more than 20%, its worst performance in its 31
year history.
I remain cautious as to what is ahead for the overall
U.S. stock market and economy.
I have sold off most of the corporate and mortgage backed
bonds in my managed portfolios during the second quarter.
I remain committed to short-term Treasury Bonds as the largest
weighting in my managed portfolios at this time, in order
to enhance safety and liquidity. However, I am still
maintaining a small weighting of gold mine and energy
stocks to try to bolster the growth of these portfolios.
Both of these sectors usually perform well in times
of political and/or economic turmoil.
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