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Vol. XVII, #5

December 31, 2002

TRACKING ELLIOTT
I’ve always been fascinated by “Elliott Wave Theory”, which purports to divine stock-market and other market trends in terms of discrete waves of psychological behavior. Any effort which attempts to quantify the “herd instinct” would seem to make sense to me, since clearly the mood of the herd sloshing from one extreme to another drives bull and bear markets, sometimes to ridiculous extremes. Elliott-wave practitioners also seem to have been closer to the mark over the long term, having called for the Dow to rise above 4000 back in the early 1980s when it was languishing under 1000, then more recently calling for a Dow under 5000 (and maybe much lower) when it poked above 10,000. In fact, the Elliott-“wavers” predictions of a deflationary bear market of several years’ duration appears to have been right on the mark (though their expected outcome has yet to be proved). Certainly, this rudimentary timing is superior to the buy-and-holdforever approach. However, I’ve always had trouble trying to use Elliott Wave theory.... or more accurately, other people’s interpretations of what the theory is predicting for the future.... for divining any short- or intermediate-term direction to stock prices. It seems to me the theory is so complicated that there are as many interpretations as there are practitioners, and disagreement on wave interpretation is common among Elliott theoreticians. So when Bob Prechter’s Elliott Wave International, which is the big player in the area of Elliott Wave analysis, offered a “free week” (of web access to all its publications), I decided to follow along. I wanted to see if it would actually have been possible for me to make money following their interpretations. The week began on Monday, November 18 at 5 PM. This gave me immediate access to the August 20, 2002 issue of The Elliott Wave Theorist, and to the September 27, October 16 (interim) and October 25 issues of The Elliott Wave Financial Forecast. The August issue of “Theorist” indicated a crash was imminent, and the Dow should erase its next 5000 points without much trouble. The lateSeptember issue of “Forecast” indicated that the most severe decline of the bear market was directly ahead. The preferred view was that the Dow, then declining from its August 22 high, would bottom in late October below 5500. The alternate view (if the Dow should move solidly above 8267) was that stocks would then rally to their August highs, then the bear would resume. The October 16 interim issue of “Forecast” indicated that the alternate view was eliminated; stocks were in a bear-market rally, and more likely would top near 890 for the S&P 500 and 8250-8400 for the Dow; or less likely, would top moderately above 965 for the S&P 500 and 9077 for the Dow. In either case, stocks would then progress significantly lower.

The Contrarian’s View is published 11 times per year on a mostly-irregular schedule, and the views expressed are those of the author and editor, Nick Chase. Because nobody can predict the future, results of past suggestions or recommendations are no guarantee of future results. Material in this publication may be freely quoted provided proper attribution is given to its source. Subscription rate: Selections are free on the Internet through the World-Wide Web service at Assumption College. Using your favorite Web-browsing program, Open URL http://nick.assumption.edu. Mailed paper subscriptions, one year for $39 to The Contrarian’s View, 132 Moreland Street, Worcester, Massachusetts 01609. There is a limit of 50 paid subscribers at one time; please check for availability before sending any money. Sorry, Visa and Mastercard are not available. Overseas subscription rate, U.S. $54. Unsolicited material sent to us by UPS or by courier other than the postal service is refused and returned to sender! ISSN 1536-4429 Phone: (508) 757-2881

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The October 25 issue of “Forecast” reiterated the bear-market rally. The S&P was expected to top at 923 or 965-972 before heading down. The Dow was currently topping, or would top out at 8935-9077 before going below 6000. And, the bear-market rally was at least 75% complete. OK, that was all very interesting, but not helpful as trading signals (except for establishing background), since too much time had elapsed. But now, on November 18, I had in hand the November 15 short-term update, which I could have acted upon (Dow 8579, S&P 910). It said the week ending November 8 was a bearish “key reversal week” (except for the Dow). More likely: The Dow would move no higher than 8800. Less likely: The Dow would peak at 8930-9077. For the S&P 500 and other indexes, the next “turn date” would be November 26, plus or minus a day, and stocks should start falling hard early in the next week. The alternate view was that stocks would meander up to the turn date. Regardless, the outlook remained bearish for stocks. I could read the Monday, November 18 short-term update in real time. It reiterated that the prior week was a ”key reversal week” (where stocks reach new weekly highs, but close below the prior week’s close). The November 6 high was in the “turn window”, so a trend reversal in prices from up to down was highly probable. For the Dow, one should remain bearish if the 8800 high remained intact; another opportunity to position oneself for further selling pressure lay ahead. The alternate view was, if the Dow should push above 8800, then stand aside and wait for the next opportunity to turn short-term bearish. For the S&P 500, if the 925 high held, the odds were strong the next downleg was starting. The Wednesday, November 20 short-term update I could also read in real time after the day’s market close (Dow 8623, S&P 914). It noted that the market had not immediately turned downward as was anticipated on Monday, and for the moment appeared to be resistant to decline. Short-sellers should be cautious; however, one could be confident that the entire rally from the October lows was a bear-market rally that will be completely retraced. The preferred view: The highs of Dow 8800 and S&P 935 would remain intact. The alternate view: The averages could

progress to Dow 8935-9077, S&P 965-971 or 10191028. Either way, it was highly unlikely that a longterm rally would materialize, and the rally in the indexes was likely to top out November 25-26, or December 2-5. The Friday, November 22 short-term update (Dow 8804, S&P 931 at market close) indicated that the push above the November 6 highs eliminated the preferred scenario (of an imminent downleg), and that stocks were still in a bear-market rally from their October 10 lows. Strong S&P resistance was at 955971, and Dow resistance was at 8935-9080. Both indexes would likely push higher during the next week before topping out. The window for the turn downward was November 25-27, but the highs could come as early as Monday November 25, or as late as Wednesday December 4, with prices to or above resistance.... S&P 955-971, Dow 8935-9080. If the averages should drop below S&P 916, Dow 8636, then the rally would likely be over and the next downward leg in the bear market would be underway. The “free week” was scheduled to end on Monday, November 25 at 5PM, before the next short-term update. When I read my e-mail on Tuesday, I got a message saying that the free week had been extended to Tuesday noon, but since I read my e-mail after 12:00, it was too late for me, I missed Monday’s update. OK, the question is, could I have made money in my TIAA-CREF retirement plan following these shortterm swing predictions? Let’s see. The earliest I could have acted was Tuesday, November 19 before the market’s close. Reading both the Friday and Monday short-term updates, I would have concluded that the current trend was supposed to be down, and therefore would have bought into (or remained in) the CREF moneymarket fund at $21.6108, Tuesday’s market close. By Wednesday evening I would have concluded that stocks were still heading upward, probably to resistance levels.... Dow 8800, etc...., so before Thursday’s market close I would have switched from CREF money market at $21.6118 to (say) CREF Equity Index at $56.7311. By Friday evening it was clear I would be on my own

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for the next week.... looking for a “turn” on or after November 25 where the Dow should appear to peak between 8935 and 9080. But if the Dow should drop below 8636, bail out anyway. On Monday, November 25, the Dow poked above 8900 during the day, then started to settle lower. This was within the turn window, and resistance was reached. That’s close enough for me, I switch out of Equity Index at $56.8065 before the market close. (Dow closed at 8849.40.) On Tuesday, the Dow closes at 8676.42, and I’m feeling pretty smart. On Wednesday, the Dow closes at 8931.68, and I’m feeling pretty stupid. (This turned out to be the closing high for the Dow to the end of the year.) Regardless, would I have made money? Yes, .1375% for six days, or 8.36% annualized. But I still had problems following Elliott. There’s always an “alternative wave count”, and lots of “ifs” in the scenarios laid out. I call this, cover your ass in case you’re wrong, so you’ll always appear to

be right no matter what happens. I would be happier if probabilities were assigned to the various scenarios. Even if it were only 55% for the preferred ones, and 45% for the alternates, and these assignments proved to be valid over the long term, you could still make money. Also, it seems to me that the Elliott Waves should be able to be deduced by computerized pattern-recognition programs, since the rules appear to be precise, though complex. If a computer program were written to recognize the patterns and assign probabilities to them, and the overall approach worked, then the program designer should keep the process to himself or herself and make a gazillion dollars. But I’m not aware of anybody doing this, so either there are a few clever souls out there who are computer-tracking Elliott and quietly making a gazillion dollars.... or Elliott Wave analysis is more craft than science, and it’s more profitable to write about it than actually use it for any short-term timing. By the way, the subsequent Elliott Wave International projections.... those that could be read for free.... called for a major bear-market downward leg to resume in December. Didn’t happen.

KISS THE PORTFOLIOS GOODBYE
I’m retiring the “Phoenix” and “Roth rollover IRA” portfolios with this issue. The reason is simple: With my retirement drawing closer, I’m obviously not going to make any really big bucks here before that time. I’ve proved my point, which is that I’m a rotten stockpicker. When or shortly after I retire, I will roll over the Roth IRA shown here, plus a bank Roth IRA, and some funds from “Phoenix”, into a single TIAA-CREF Roth IRA, largely for the convenience of my wife, who then will have only one phone call to make, and one investment company to deal with, if I should croak first. OK, Nick, you say, just when are you going to retire? Well, I’m not sure yet. There’s a certain minimum amount of money needed to fund my expected monthly retirement payments, and that can be reached more-or-less by my (revised) target time. My July mistake set back that time by only about six months.... in contrast to some of the horror stories I’m beginning to hear, of people whose retirements have been put off a decade or more, or people already retired who have had to go back to work, because the bear market ate their portfolios. So, in that respect, I’m in pretty good shape. The problem is that in my regular retirement annuity, which by college rules must be annuitized, if I leave the funds on the CREF side there is nothing which yields enough to satisfy the payout ratio and still leave some protection for inflation. TIAA-CREF assumes a 4% earnings payout ratio (roughly a 6.54%-per-year drawdown of funds in my age bracket). If my CREF investments make more than 4% per year, my monthly income will rise; if I make less than 4%, it will decline. And, except for bonds, which have done well lately but which are at historic highs, so their performance is not likely to be as spectacular over the next few years, there is nothing currently yielding 4%. The money-market fund is pathetic at less than 2%; stocks have been negative for three years now; Real Estate, which historically

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has yielded 8%-plus per year, has been yielding less than 4% for the past two.... and the real-estate bubble has only begun to pop. So my retirement may effectively be tied to the end of the bear market. Stocks need to exhale the remainder of the gas from the bubble, so I can buy in again at reasonable prices and reap the 7% to 11% long-term growth rate. But if, as I expect, we get a variation of

the Japanese scenario, with mini-bulls within a decade-long downtrend, that opportunity may not present itself within any reasonable retirement timeframe for me. So at some point I may just have to bite the bullet, take my chances, and plunge into retirement, because I’m not planning to work long enough to reach the point where Social Security alone meets my monthly income needs and the yield on my retirement investments is irrelevant.

QUOTES FOR THE MONTH
According to the new popular theory, the bright bit of glorious, gleaming fortune coming our way is that asset prices will be back up, all wrongs will be righted, nothing bad will ever again happen to anybody, and everything will be peaches and cream from now on! Permanent economic prosperity! It's literally right around the corner, now that the Fed- our heroes! -have promised to Make the Money Available! Or, simply, Make the Money. I mean, you can pick up any economics book and find plenty of examples, oh jeez there are so many it is hard to think of just one, of a central bank wildly expanding the money supply, buying debt, monetizing federal deficits, printing money, pounding down interest rates below inflation, jiggering bank ratios, etc. where everything worked out just fine in the end. Can't you? You can't? Are you sure? Not a one? None? Are you really, really sure? Damn... - Richard Daughty Worker productivity grew much faster in the third quarter than originally thought, according to the Labor Department's latest facts and figures. The government agency reports that productivity rose at a brisk 5.1% annual rate - the strongest showing since 1973...Does anybody really believe this stuff? Measuring "productivity" in a service economy like ours seems a bit like measuring love. What is the appropriate standard for measuring love? Total hours in the bedroom? Minutes of conversation per hour of mealtime? The argumentto-embrace ratio? Likewise, productivity does not lend itself to measurement. And even if, by some fluke, the Labor Department happened to measure this financial love correctly, there's nothing about this information that would tell an investor whether he should buy 100 shares of IBM or buy municipal bonds... - Eric Fry The forcefulness of [Fed Governor] Bernanke's speech tells observers plenty about the ultimate winner in the battle between inflation and deflation. Bernanke listed several heretofore rarely used policies that would be emphatically employed by the Fed to avoid deflation: (1) should conventional open market purchases of Treasuries not do the trick, the Fed would extend out on the yield curve to include even long-term bonds, (2) the Fed could influence the yields on privately issued securities - corporates and mortgages - in order to lower the cost of private credit, (3) the Fed would buy foreign government debt in a thinly disguised attempt to lower the dollar and increase U.S. competitiveness and inflation at the same time....I believe them. These people may be misguided, their policies might eventually do more harm than good, but I believe them. They will not allow the U.S. economy to deflate as long as the current regime is in power. - Bill Gross Fed Governor Bernanke announced to the whole world that the Fed had both the means and the will to destroy the dollar. It was as if he had walked into a waterfront bar and said he could beat anybody in the place.... Let's get a couple more drinks.... and see what happens next: All the world's central bankers are crowding 'round. They're putting their money on Bernanke and the Fed. They all believe they'll knock out deflation. Mieno wasn't able to do it in Tokyo, true enough they say...but the Japanese just can't punch; everybody knows that. "It's really simple," Milton Friedman says from the end of the bar, "just print money." Well...yes. Just like the way to avoid a winter cold is to blow your brains out in October. Everybody knows it's true, but who's going to pull the trigger? - Bill Bonner

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The U.S. is nowhere near close to sliding into a pernicious deflation. - Alan Greenspan Deflation is a consequence of bad policy, not a cause of bad results. - Milton Friedman The explosive 1000 point rallies we see are evidence there's actually still a lot of bullish sentiment out there. I don't think it's going to be over until we see 6- 8% dividend yields everywhere, a great decline in the number of mutual funds, and low trading volumes. And not only won't there be bullish articles in McPaper [USAToday], there won't even be bearish articles. There won't be any articles on stocks, because nobody is going to want to hear about stocks at all. - Doug Casey My husband and I are very concerned that we won't ever be able to retire. I've worked hard for many years and dreamed of retirement; now I am terrified I'll have to keep on working well past retirement age just to meet my financial obligations. Putting our children through college, and then paying for their weddings, put a huge strain on us both personally and financially. We've almost become resigned to the notion that our 'golden years' will be spent working and not relaxing. - Rhonda Wollheim Everything tanked. I kept the funds because they always say long-term investors shouldn't react to every glitch in the market. Now I have to get rid of them because I don't think there's any way they will ever rebound. I get anxious, sometimes I lose sleep. Usually, I'm busy enough during the day that it's a background irritant and no more. But sometimes I find myself up at 3 a.m., pissed off at myself, pissed off at those stupid Internet techies who thought they didn't need basic business principles because their 'product' was somehow 'special' and pissed off at the politicians who wink at all the slimy practices of accountants and stockbrokers. - Cynthia Fitzgerald I feel a weird sense of shame, tied into old feelings of inadequacy that resurfaced during a recent visit from my father. Living on his retirement savings, Dad gives a modest sum to my daughters on their birthdays, money that I am supposed to invest wisely. When, out of curiosity, he asked to see my most recent mutual fund statement, I gave him the still-sealed envelope, feeling like I was handing over my lackluster fifth-grade report card.... I had done what my broker suggested, asking few questions and working on blind faith. As a result, I've lost more than half of my children's college fund. Not to mention that right there, in black and white for Dad to see, was that exceptionally damning line item: WorldCom. - Martha Frase-Blunt ....before you can drive a car or fly a plane, you have to have a certain amount of training with an experienced instructor. Then you have to take an examination and a test drive or flight, where you can fail, before you get your driver's or pilot's license. For the latter, you also have to keep up with continuing education. To qualify for night, instrument, or non-visual flying, you have to take additional instruction. Yet neophyte investors, some unable to articulate the difference between a stock and a bond, are allowed to "pilot" their life savings and/or intended retirement portfolios without any form of instruction or training. All they have to do is open a brokerage or mutual fund account and give some (frequently confused) indications about their financial resources and investment objectives. Since this neophyte investing is almost always started in favorable weather, a bull market, they are totally unprepared for what might happen when a storm arrives. Worse, they have been conditioned (brainwashed?) into believing the mantras of "buy on the dips", "hold for the longer term", and that "there is no long-term risk in stocks, only short-term volatility". - Raymond DeVoe, Jr. I rode the bubble up and rode it down again. It's hard to complain. It had the feeling of being found money. Jack Knox [retired from Northrop Grumman Corp.] When the market hit bottom earlier this month [October 2002], falling to five-year lows, mutual fund investors, in the aggregate, had a slight loss on all the money they put into domestic stock funds since October 1990. - James Bianco [Bianco Research. Nick’s comment: That's because the bulk of "new money" flowed in near the end of the bubble.]

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We'd like to offer a special Thank You to the patsies. Without them...and the Fed and Wall Street goading them along...the year would have been an even bigger disaster. While the big money has been steadily leaking out of stocks, the little guys have been stuck with the program. Only 1% of assets was pulled out of stock mutual funds in 2002... They should have panicked a long time ago. The average fund lost 22.7% this year. But the lumpeninvestoriat are still believers. They still think that if they leave their money 'in the market' long enough - they'll get rich. - Bill Bonner Early in the year 2001 twenty-two "expert" Wall Street analysts from Louis Rukeyser's "Wall Street Week" gave their estimates as to where the Dow would be at the close the year. The estimates ranged from 11,400 to 12,300. But the actual Dow close was 10,021. Not one of the 22 panelists guessed that the Dow would close under 11,000. Again, early this year the same twenty-two top analysts gave their estimates as to where the Dow would close in 2002. The estimates ranged from 10,750 to 12,100. As of today, the Dow is at 8460. Not one of the 22 experts saw the Dow closing below 10,000. How can this be? My answer is that none of these analysts is able to recognize change. Although we are in a primary bear market, evidently NONE of these experts understands what this means. - Richard Russell There is a "glut" of mature workers, say press reports. A few years ago, people dreamed of early retirement. Now they dream of finding some miserable job that they can do until they drop dead. With more and more baby boomers reaching retirement in the years ahead - and few of them with enough moola to retire on - the glut will probably get worse. - Bill Bonner When I lived in Japan from 1990 to 1992, I was witness to the bursting of the largest speculative stock and real estate bubble to date. Neither I, nor anyone else in the country noticed a thing. The stock market had peaked on the last day of 1989, and the 1990's saw the market go nowhere but down for the entire decade. But in 1992, when the [Japanese] market decline was still young, it was thought of as merely a breather, a healthy correction of an overheated market. Real estate prices, after all, remained strong. By 1994, housing prices in Japan finally began to crack. Conditioned by decades of rising prices, my Japanese relatives in Yokohama rushed in to buy when prices finally came within their grasp. With the help of low interest rates and a two-generation mortgage (!), they hurried to purchase their first home ever. They were in a rush, lest prices once again shoot upward, beyond their reach forever. But instead of squirting up and away, home prices in Japan fell further, and then continued to fall and fall and fall. They fell so much that by the time I visited again in 1998, the value of their home was less than half of what they had paid for it just four years prior. Others saw the value of their homes deteriorate by 90%. Deflation had established its foothold in the land of the rising sun. - M. A. Nystrom People have been encouraged or duped into stripping all the equity out of their homes. - Liz Ryan Murray [program officer, Home Ownership Center] It's hard for me to live in a world where you can't tell the truth because somebody will stick a javelin in your heart for doing it. - Paul O'Neill [former Treasury Secretary] The Administration's goal of invading Iraq is not about destroying weapons of mass destruction. If it were, we would have invaded North Korea long ago, which is the real producer of such weapons, and says so publicly..... It's about placing in the hands of the United States government the terms of oil's production at the margin. This is the most important single economic lever in the world economy and the only major economic lever than the United States government does not control. - Gary North

STOCK MARKET OUTLOOK
Santa forgot to come this year. You, of course, want to know what happened in the years which followed

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Decembers when Santa failed to produce the usual year-end rally. In 1977, stocks fell 7.2%, December 1977/January 1978. This was the tail end of the 1976-77 bear market. In 1981, stocks fell 2.0%; the bear market didn’t end until the following August. In 1983, stocks fell 4.3%. This was near the beginning of the 1984 bear market. (Actually, tech stocks had peaked in the spring of 1983.) In 1989, stocks fell 4.3%. This was the beginning of the 1990 bear market, which ended decisively with the bombing of Baghdad in January 1991. Stocks have been going down for three years already, so let’s take away those years which marked the beginnings of bear markets. That leaves 1977 and 1981; and if history should repeat, it suggests that, if not the end the bear, we have at least seen a solid intermediate bottom. Curiously, while the averages sold off about 5% in December, the NYSE “Timer’s Trend” remained bullish, which indicates that there is increasing underlying strength in stocks that’s not yet reflected in the averages. This is a strong indication that higher prices lie ahead, at least for a few months. Also adding impetus for higher prices is the likelihood of more favorable tax treatment of cash dividends. (For some reason, I’ve never figured out why, these expected tax changes always seem to goose stock prices in the first few trading days of the new year, but never in the waning days of the old. Some sort of arbitrage in operation, I presume.) Also, we can credit tax-loss selling for the absence of

Santa in December; Santa may just be late, because there were LOTS of losses to take. So we may, I think, be about to embark on one of those mini-bulls, for at least a few months, maybe longer. And I think this is probable simply because, after three years of losses, people have had enough. If we had a second dip in the recession, it appears to have passed, as the economy is growing marginally stronger; consumers’ expectations for the future are looking up; we’re about to flatten Iraq again and this time around the job won’t be left unfinished; and there’s still enough withdrawn-home-equity in the pipeline to fund another round of senseless spending. Plenty of reasons to be bullish, at least for a little while. A UCLA geophysics professor, Didier Sornette, has been applying complex-theory mathematics to quantify the “herd instinct” and predict the future direction of stocks in a broad sense. The theory quite accurately traces out the path of the current bear..... no surprise, since university professors excel at predicting the past. Whether this theory has any predictive value for the future remains to be seen; but certainly, attempts to gain mathematical insight into the behavior of the herd are admirable, even if they turn out to be somewhat fallible. Interestingly, Sornette’s projections are roughly for a rising market into mid-2003, then another steep plunge, the kind that wipes out several thousand Dow points, bringing the bear to an end in mid- to late 2004. This more-or-less corresponds to my own view for the stock market, which is for rising prices into the spring of 2003 (maybe longer, but I won’t claim that now), followed by the return of the bear in late 2003 or in 2004, with another solid intermediate bottom (in a decade-long bear market) in 2004. 2005 should be a good year for stocks.

PORTFOLIO REVIEW
The combined performance of the portfolios (including predecessors, but excluding “PIG” and TIAA-CREF) from January 1987 to the present, adjusted for the dilutive effect of added shares, is -14.00%, for a compound annual rate of return of -0.93%. For comparison purposes, from January 1, 1987 to December 31, 2002 (16 years), the CREF stock unit value (whose performance closely parallels the S&P 500 with dividends reinvested) has risen 333.01%, for a compound annual rate of return of 9.60%. WARNING: I am a rotten stockpicker. Prices shown are as of December 31.

A. "Phoenix" -real portfolio, begun on October 1, 1995.

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Shrs

Description

Symbol {CZN/nyse} [BEARX]

Bought 1Oct95 30Aug02

Sold On

Sold At

Cost Was 506.00 3092.47 .00 3,598.47

Price 10.55 7.33

Curr Value 485.30 3,197.35 0.00 3,682.65

46 Citizens Communications 436.2 Prudent Bear Fund [436.200sh] CASH .00

Totals

SUMMARY - "Phoenix": Original cost (adjusted): Present value: Increase:

$ 4,998.21 $ 3,682.65 $-1,315.56

[-26.32%]

The performance of this portfolio and its predecessors (“Hedger’s Delight”, “Present and Future Income”, “Crapshooter’s Folly”) from January 1987 to the present is -16.45%, for a compound annual rate of return of -1.11%.

COMMENT on "Phoenix": There is no change from the last issue (cash balance is not up to date). B. "Professors’ Investment Group (PIG)" - investment club portfolio.
Shrs Description Symbol [AAPL/otc] .11 .30 {ABX/nyse} [BP/nyse] [ELN/nyse] [EWJ/ase] .18 [NOK/nyse] [PALM/otc] [PLMD/otc] [BEARX] [XRX/nyse] Bought 26Jun02 14Nov96 26Jan99 1Aug02 28Jun01 14Jun01 5Jun02 26Jun02 10Oct02 1Aug02 Sold On Sold At Cost Was 1034.80 1466.01 1292.50 585.00 1035.00 2233.00 1097.00 1070.35 3500.00 685.00 2293.27 15,257.13 Price 14.33 15.41 40.65 2.46 6.95 15.50 15.70 30.84 7.33 8.05 Curr Value 859.80 770.50 1,219.50 615.00 695.00 1,550.00 628.00 1,387.80 3,255.53 805.00 2,293.27 13,219.60

60 Apple Computer Inc. 50 Barrick Gold 30 BP 250 Elan Corp. PLC ADR 100 iShares MSCI Japan Index Fund 100 Nokia OYJ ADR 40 Palm Inc. 45 PolyMedica Corp. 444 Prudent Bear Fund (444.138sh) 100 Xerox Corp. CASH & money market

Totals

SUMMARY - "PIG": Original cost: Present value: Increase:

$ 9,899.00 $13,219.60 $ 3,320.60

[+33.54%]

COMMENT on "PIG": There is no change from the prior issue.

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C. Roth rollover IRA - real portfolio, includes commissions:
Shrs Description 102.8 AmerCent GlobalGold [102.834sh] 132.6 Cr Suisse Japan Grwth (132.631sh) 102 Freeport-McMoRan Copper&Gold 35 iShares Lehman 20+yr Treasury 11 New Germany Fund 272.8 Prudent Safe Harbor [272.772 sh] Money market Symbol [BGEIX] [WPJGX] [FCX/nyse] [TLT/ase] [GF/nyse] [PSAFX] Bought 28Dec94 12Jan01 27Dec94 30Aug02 20Dec91 5Sep02 Sold On Sold At Cost Was 1050.00 887.30 2348.60 3058.75 53.50 2988.00 76.07 10,462.22 Price 9.13 3.76 16.78 88.57 3.55 11.64 Curr Value 938.87 498.69 1,711.56 3,099.95 39.05 3,175.07 76.07 9,539.26

Totals

SUMMARY - IRA: Original (1983-86) cost: Present value: Increase:

$ 8,326.19 $ 9,539.26 $ 1,213.07

[+14.57%]

The performance of this portfolio (including its predecessors) from January 1, 1987 to the present is -13.02%, for a compound annual rate of return of -0.85%.

COMMENT on IRA: There is no change from the last issue. D. TIAA/CREF 403(b) retirement plan; I switch between indexed stock/bond/money funds:
Date 13Mar1992 29Apr1992 19Jun1992 29Jun1992 24Jul1992 29Oct1992 23Dec1992 16Jan1995 20Jan1995 30Oct1997 30Oct1997 11Feb1998 11Feb1998 16Jun1998 23Sep1999 17-18May2000 Sold Bought stock @ 56.65 MM @ 13.41 MM @ 13.48 bond @ 31.19 bond @ 32.14 MM @ 13.55 MM @ 13.57 stock @ 56.74 stock @ 56.76 MM @ 13.61 MM @ 13.72 stock @ 58.61 stock @ 61.48 MM @ 13.78 MM @ 14.83 equity-indx @ 26.44 eq-indx @ 26.19 MM @ 14.84 MM@ 17.24 [email protected] (27.17%) MM@ 17.24 i-i [email protected] (27.17%) bond@ 48.84 [email protected] (27.17%) Ii-i bond@ 26.23 [email protected](27.17%) MM@ 17.84 TIAA Traditional (45.87%] [email protected] I-I [email protected] (53.32%) rate adjustment to 7.25% in SRA Date 12-13Jul2000 8Jan2001 8Jan2001 1Feb2001 20Sep2001 21Nov2001 11Dec2001 17Dec2001 17Dec2001 31Dec2001 25Mar2002 26Mar2002 July-Aug2002 Oct-Nov2002 2Dec2002 2Dec2002 Sold Bought rate adjustment to 7.5% in SRA TIAA Traditional [email protected] [22.77%] TIAA Traditional [email protected] [4.56%] i-i [email protected] [email protected] [26.76%] [email protected] [email protected] [2..44%] i-i [email protected] [email protected] [4.35%] [email protected] [email protected] [6.19%] i-i [email protected] [email protected] [9.94%] bond@61,54 [email protected] [9.26%] i-i [email protected] [email protected] [8.21%] [email protected] TIAA Traditional [9.13%] [email protected] [email protected] [3.39%] many whipsaw switches, not calculated yet switches between MM and i-i bond i-i [email protected] [email protected] [13.22%] i-i [email protected] [email protected] [13.22%]

Values, 31Dec2002: stock, 128.82; equity-index, 53.78; MM, 21.64; bond, 68.74; inflation-indexed bond, 38.97; real estate, 173.90; TIAA current yield in SRA, about 6.5% (new money at 4.5% through February 28, 2003). As of December 31, 2002, my retirement portfolios were invested: 51.70% in TIAA, 22.47% in TIAA Real Estate, 12.54% in CREF Equity Index, and 13.29% in CREF money market. Mental “stop-loss” for the portion in CREF Equity Index is $53.50 unit value.

Page 10

The Contrarian’s View, December 31, 2002

Vol. XVII, #5

Gain, 1988: 18.91%; 1989: 14.48%; 1990: 8.28%; 1991: 27.93%; 1992: 10.20%; 1993: 3.08%; 1994: 4.07%; 1995: 4.80%; 1996: 5.28%; 1997: 5.38%; 1998: 5.72%; 1999: 5.12%; 2000: 9.99%; 2001: 1.11% Gain, January 1 through March 31, 2002: 0.97% (3.86% annual rate of return) Total gain since January 1, 1988 (14.25 years): 223.43% Compound annual rate of return: 8.59% (My long-term target: in excess of 10%) Gain shown excludes the impact of additional monthly cash contributions.
(Please note that I have not had the time to calculate my rate of return beyond March 2002, and may not get the time until I retire.) Buying CREF stock on January 1, 1988 and holding it gained 422.38%, for a compound annual rate of return of 11.46%.

Comment on NYSE “Timer’s Trend”: We are currently on a BUY signal of November 1. ____________________________ NYSE TIMER'S TREND _________________________________
Fri Mon Tue Wed Thu Fri Mon Tue Wed Thu Fri Mon Tue Wed Thu Fri Mon Tue Wed Fri Mon 1 4 5 6 7 8 11 12 13 14 15 18 19 20 21 22 25 26 27 29 2 Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Dec 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 . . . . #. #. # . . # . . . .# . . . . .# . . . | #. | # |# . | # | . | . | . # . | . | # | # |# . | . |# . | .# # . | #. | . | . # |# . | .# }| | | | | | [| ]| | | | | | | | | | | | | | 8517.64 8751.60 8678.27 8771.01 8586.24 8537.13 8358.95 8386.00 8398.49 8542.13 8579.09 8486.57 8474.78 8623.01 8845.15 8804.84 8849.40 8676.42 8931.68 8896.09 8862.57 |-. * +. * |+. * |~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~* |+. * |-. * |~.-~*~~~~~~~~~~~~~~~~~~~~~~~ | .* |.* | .* |-. * +. * +. * |+. * |+. * +. * |+. * |+. * |+ * |+. * |+ * Tue Wed Thu Fri Mon Tue Wed Thu Fri Mon Tue Wed Thu Fri Mon Tue Thu Fri Mon Tue 3 4 5 6 9 10 11 12 13 16 17 18 19 20 23 24 26 27 30 31 Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 . #| . #| .# | . | # | . | . |# . |# .# | . | .# | #. I # I . | . |# . #| . | # I . |# . | . . . # . # . . . .# . . . .# . . # . . # | | | | | | | | | | | | | | | | | | | | 8742.93 8737.85 8623.28 8645.77 8473.41 8574.26 8589.14 8538.40 8433.71 8627.40 8535.39 8447.35 8364.80 8511.32 8493.29 8448.11 8432.61 8303.78 8332.85 8341.63 |+. |+. +. +. |-. +. +. |+. +. |+. +. |-. ||-. |-. |-. +. +. +. +. * * * * * * * * * * * * * * * * * * * *

-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Comment on NASDAQ “Timer’s Trend”: We’re currently on a SELL signal given December 9. ____________________________ NASDAQ TIMER'S TREND ________________________________
Fri Mon Tue Wed Thu Fri Mon Tue Wed Thu Fri Mon Tue Wed Thu Fri Mon Tue Wed Fri 1 4 5 6 7 8 11 12 13 14 15 18 19 20 21 22 25 26 27 29 Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov Nov 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 . | .# . | . # . | # . | .# # | . .# | . #. I . . | # . |# . . | .# . | #. . # . .# | . . | .# . | . # . | # . | . # . #| . . | . # . | .# }| | | | | | {| | | }| | | [| ]| | | | | | | 1360.70 1396.54 1401.17 1418.99 1376.71 1359.28 1319.19 1349.56 1361.34 1411.52 1411.14 1393.69 1374.51 1419.35 1467.65 1468.74 1481.90 1444.43 1487.94 1478.78 |+. |+ | .+ | .+ | .+ |+. |-. |-. |+. |+. |+ |+. |+ |+ |+ | .+ |.+ |.+ |.+ * * * * * * * * * * * * * * * * * * * * Mon Tue Thu Fri Mon Tue Wed Thu Fri Mon Tue Wed Thu Fri Mon Tue Thu Fri Mon Tue 2 3 5 6 9 10 11 12 13 16 17 18 19 20 23 24 26 27 30 31 Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 02 . | .# . #| . . |# . . | # # I . . I #. . & . . I# . #. I . . I # . & . #. I . # I . . I# . . I # . #I . . I #. .# I . # I . . & . | | | | {| ]| | | [| ]| [| | | | | | | | | | 1484.78 1448.96 1410.75 1422.44 1367.14 1390.76 1396.59 1399.55 1362.42 1400.33 1392.05 1361.51 1354.10 1363.05 1381.69 1372.47 1367.89 1348.31 1339.54 1335.51 |.+ |+ | .+ |+ +. +. +. +. |-. +. +. |-. ||-. |-. |-. +. +. |-. |-. * * * * * * * * * * * * * * * * * * * *

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------“Timer’s Trend” is based on 4% and 10% exponential moving averages of the New York Stock Exchange or NASDAQ advance/decline lines (that is, the ratio of advancing to declining stocks). There are many symbols shown above, but the ones that count are the braces: {, } = "Timer's Trend" (4% exponential confirmed by 10% exponential) SELL ({) or BUY (}) signal.

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