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To: Les H who wrote (7882)	6/24/2003 10:16:20 PM
From: Les H	Read Replies (1) \| Respond to of 29596

U.S. Strategy: Turning Defensive Steve Galbraith My take on the views of European investors, based on our recent conference, is that most are pessimistic on the prospects for economic reform in Europe and believe the U.S. is actually making more progress in this area. Surprisingly, roughly 20% thought that gold would be the best asset class over the next year. I also got the sense that we should not be complacent on the outlook for the dollar, given the widely divergent geopolitical views in Europe and the U.S. As you evaluate the U.S. stock market, keep in mind that as the dollar weakens, European investors may be looking at negative expected returns for U.S. assets, so flows from Europe may dwindle. We have gone back over the past 70 years to see what kind of returns you should expect when yields are at current levels. For long-duration bonds you are looking at about a 1% five-year return, so you would not even earn the coupon. For stocks, returns average out to mid-single digits. One way to look at the current market is to realize that 10-year bonds have recently returned twice their long-term average, which is similar to what happened to Nasdaq in the run-up to March 2000 on a rolling 10-year basis. Then like now, no one was willing to call the top. Over the past 10 years, government bonds have outperformed stocks, meaning a zero equity risk premium. On our interest-rate-based dividend discount model, which includes a penalty for extremely low interest rates, the S&P 500 is now about 10% overvalued. On a straight P/E basis the market is about fairly valued. Our advice to investors at this point is to become somewhat more defensive. One approach is to sell what has worked and buy what has not. Technology has worked in the recent rally, while staples and energy have not. morganstanley.com

To: Les H who wrote (7882)	6/26/2003 7:12:15 PM
From: Les H	Read Replies (1) \| Respond to of 29596

TRIN, A/D, and U/D for Thursday Jun 26, 2003 _ 5d TRIN 10d TRIN 10d A/D 10d U/D 21d A/D 21d U/D DJIA/NYSE 1.20 1.22 0.90 0.85 1.20 1.14 OTC 1.12 1.18 0.92 0.87 1.10 1.17 S&P 500 1.01 1.07 0.76 0.81 1.09 1.09 S&P 100 0.93 1.03 0.76 0.85 1.10 1.07 NASDAQ 100 1.23 1.25 0.80 0.83 1.04 1.12 TRIN overbought <= 0.75 oversold >= 1.50 Adv/Dec ratio overbought >= 1.25 oversold <= 0.75 Up/Dn vol ratio overbought >= 1.25 oversold <= 0.75 Note: the above TRINs use an exponential average of daily TRIN values. below, I've provided the normal TRINs that use a regular moving avg. _ 5d TRIN 10d TRIN DJIA/NYSE 1.35 1.20 OTC 1.38 1.26 S&P 500 1.18 1.08 S&P 100 1.16 1.03 NASDAQ 100 1.68 1.28