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To: fedhead who wrote (12785)	7/17/2002 6:22:58 PM
From: stockman_scott	Respond to of 57684

Buyback Guru Says Stocks Near Bottom David Fried, The Buyback Letter, 07.17.02, 3:00 PM ET The S&P 500 has lost 13.8% for the first half of the year. This is the worst decline for the index since it dropped 21% for the first half of 1970. The performance is not surprising given the recent slew of scandals that have rocked Wall Street. Starting with Enron (otc: ENRNQ - news - people ) last year, the trend has continued recently with Tyco (nyse: TYC - news - people ), WorldCom (nasdaq: WCOME - news - people ), Xerox (nyse: XRX - news - people ) and Rite Aid (nyse: RAD - news - people ) all making headlines for embarrassing reasons. Not long ago, those five companies could have formed the backbone of a strong portfolio. Added to this is the constant gnawing worry about the war against terrorism and the uncertainty as to when another attack will strike in our country. All this makes for an unsettling investment climate. When times are uncertain, it helps to periodically review the overall economic picture. The Big Trends presented below will help you keep a clear head in what always feels like a crazy market. Underneath the market noise are, as always, solid realities that ultimately rule the day no matter what investors' near-term hopes or fears may be. Big Trend No. 1: The Inflation Trend Since 1920, the S&P index has gone up an average of 15.5% when inflation was in the 2%-5% range. When inflation topped 5%, the S&P average rose just 1.3% per year. Currently, inflation is running well below 5%. The inflation trend remains very positive. Inflation indicator: positive Big Trend No. 2: Long-Term Bond Yield Vs. S&P Yield Peter Lynch, the famed fund manager of Fidelity's Magellan Fund during its glory days, uses the following rule of thumb: When yields on long-term government bonds exceed the yield on the S&P 500 by 6% or more, sell stocks and buy bonds. As of June 30, the yield on the S&P 500 was 1.50% while the yield on 30-year government bonds was approximately 5.47%. The difference between the two yields is 4.07%. Yield indicator: positive Big Trend No. 3: Action Of The Federal Reserve Bank The Fed lowered interest rates 11 times last year. The Fed has changed its bias to neutral. For a while we have felt that the next move by the Fed would be to raise rather than lower interest rates. However, that is no longer a certainty. Fed indicator: neutral Big Trend No. 4: The Yield Curve Currently the yield curve is positive. As of June 30, the spread between a one-year Treasury bill and the 10-year bond was 2.70% and the 30-year bond currently yields 5.47%, 3.34% more than the 2.13% yield on the one-year Treasury bill. Economists generally feel that an inverted yield curve indicates that an economic slowdown is imminent. The yield curve is in order. Yield curve indicator: positive Big Trend No. 5: Valuation Recent market declines continue to take the froth out of the high-flying big-cap stocks. The S&P 500 is down about 35% from its peak. However, the S&P 500 still trades at almost 36 times earnings, a historically high number, as earnings have declined faster than prices. Interest rates will have to remain low and earnings must rise to support current prices for the popular large-cap stocks. Buying value in this market remains extremely important. Valuation indicator: negative Big Trend No. 6: Investor Sentiment We add the total bullish percentage readings of Investors Intelligence, Consensus Index, AAII Index and Market Vane, as reported in Barron's every Sunday, and average this figure for the month. We consider an average reading of over 200 to be negative, while readings of under 150 are positive. The average total reading for the five weeks ending June 30 was 127. This reading is the same level as it was for last September, the month of the World Trade Center attacks. We have not had a monthly reading of over 200 since December 2001. Readings over 240 have marked market highs over the past few years, while readings of about 130 have marked market bottoms. Sentiment indicator: positive Big Trend No. 7: Earnings Sentiment We track the quarterly positive and negative earnings surprises as reported in Barron's every week. We feel that positive surprises and revisions are bullish for the market, as they indicate that professional analysts have been too negative, while negative revisions indicate that analysts have been too optimistic. During the just-concluded quarter, positive quarterly earnings surprises beat negative surprises 88-37, a ratio of just over 2-to-1. Fiscal year earnings revisions surprises were essentially equal. This indicates that analysts' current estimates for 2002 earnings are probably about right, meaning there will be an absence of upside surprises to drive the overall market. Earnings sentiment indicator: neutral Summation Commentary Four of our seven indicators are positive (inflation, yield, yield curve and sentiment), while two indicators are neutral (the Fed and earnings sentiment). Valuation is the only negative indicator. Our indicators are telling us that the investment climate is mildly positive at this time. While the market may have more downside risk, particularly if there is another terrorist attack or if we slip back into recession, we are still significantly off market highs. We estimate downside risk to be less than average right now. This is a change from the mid- and late '90s, when risk was at extreme levels due to an extremely overvalued market. It is impossible to pick a bottom in the market. However, our indicators are telling us that a bottom is near. The market looks and feels grim right now, as it is reeling from the exposure of corporate wrongdoing. However, we believe that the sensational headlines about today's wrongdoers represent a tiny fraction of the publicly traded companies. The overwhelming majority of managements are honest and trustworthy even when "nobody is looking." We should continue to invest accordingly. _________________________________- Excerpted from the July 2002 issue of The Buyback Letter forbes.com

To: fedhead who wrote (12785)	7/17/2002 7:57:13 PM
From: Lizzie Tudor	Read Replies (1) \| Respond to of 57684

Anindo, see my post to BGR. The issue I have is outsourcing marketing and business development types and I am using I2's collapse wrt manugistics as example of what happens when you do this. I don't know - maybe i2 falling apart and manu coming up with a bunch of new products had nothing to do with i2 outsourcing marketing to india. But something really went wrong there and manu is doing the same exact license numbers as i2 now with a fraction of the staff so no need to outsource for them. Oracle seems to be outsourcing effectively btw. L