This week the Fed cut rates by 0.25% as I predicted, yet the long rates have risen by over 0.50% from the lows. The dollar rises, gold drops and the stock market declines. On Tuesday, I was a guest of Ron Insana and Sue Herera on CNBC's "Business Center." During the interview, Ms. Herera asked me, "What would you like to see the Fed do?"

Since I normally simply analyze Fed actions rather than prescribe them (I assume Greenspan does not really care about my opinions) I was brought up a little short, and answered that I would like to see the Fed tell us whether they are going to work to bring down long rates, instead of merely hinting or suggesting or threatening. The answer would give us a real indication as to whether we will have a recovery or at least a continuation of the Muddle Through Economy or will slide into a recession. They told us absolutely nothing, which in my opinion is a very risky option. The bond and stock markets seem to agree.

Since that interview, I have given a great deal of thought to that question. The answer is far more complex, and has to do with how a number of factors, much of which is beyond Fed control, interact. I started to write on this today, but realize I need to let this topic cook in my mind some more. The economy of the world and the US is at an "inflection point." Since next week is the beginning of the second half, we will also discuss if there is the hint of the elusive "second half recovery."

That will wait for next week. Today we will deal with a far more important matter than my thoughts on the Fed: What kind of returns can we expect from the stock market over the next 10-20 years? This week's letter will require you to put on your thinking caps, but will help you to be a better investor if you grasp the import of what we are saying.

(As a side note, I will be in Paris, Geneva, Boston, Halifax, San Francisco and New Orleans within the next few months. Already I am tired. Details below.)

The essay below is part two (of four parts) of a series from my upcoming book-in-progress. Warning: this letter is a little longer than most, but this section needed to be kept together. This section is co-authored with Ed Easterling of Crestmont Holdings. Ed Easterling is a colleague of mine in the world of hedge fund analysis. He is an expert on Texas based hedge funds. (Let's hear it for specialization.) His client list consists of institutions and high net worth individuals. He has been trying to develop a graphic way to show his clients what they should expect from simple stock market returns over the next decade.

This research into stock market and economic cycles will give us insight into how secular bear markets actually work. It will also give us a clue on how to invest in stocks even in a bear market cycle. (Note: when the pronoun "I" is used, it denotes a personal comment by John Mauldin.)

The Investment Matrix: The Real Truth about Stock Market Returns
(This section will reference charts available at www.CrestmontResearch.com. Click on "Stock Markets" and the graph called "Long Term Returns." We will provide large fold-out versions of the graphs in the book. Readers of this e-letter can hopefully get the sense of what we are saying without looking at the graphs, but if you have the time, we would suggest reviewing them. If you are not going to be able to look at them, you might skip the first sections which explain what you are looking at and go on to the analysis following the subhead: The Investment Matrix Revelations. [Note from John - you will need Adobe Acrobat. I prefer to greatly increase the viewing size. You can also get Kinko's (or other similar firms) to print these on large color graphs.])

The past 103 years have provided over 5,000 investment period scenarios-that is, the combination of investment periods from any start year to every year since that time. This provides an extensive history across which to assess the potential and likely outcomes.

Like the movie, The Matrix, this Investment Matrix slows down the fast-paced motion of the markets, letting us see the ebb and flow of the economic tides over long periods of time.

There are several versions of the chart on the web site. We call your attention to two of them: one, called "Tax-Payer Real" is the S&P 500 index including dividends and transaction costs adjusted to reflect the net return after inflation and taxes (see details on taxes below). You will not see this one in a mutual fund sales presentation. The second is called "Tax-Exempt Nominal." It assumes your money is all in tax sheltered retirement accounts, there is no inflation (thus "nominal"), and you don't pay taxes when you take out your money. This is the "long run" numbers you are most likely to see in marketing brochures. (You can view other versions of the chart which show "Tax-Payer Nominal" and "Tax-Exempt Real" at www.CrestmontResearch.com)

Let's take a moment to explain the layout of the charts. There are three columns of numbers on the left hand side of the page and three rows of numbers on the top of the page. The column and row closest to the main chart reflect every year from 1900 through 2002. The column on the left side will serve as our start year and the row on the top represents the ending year. The row on the top has been abbreviated to the last two numbers of the year due to space constraints. Therefore, if you wanted to know the annual compounded return from 1950 to 1973, look for the row represented by the year '1950' on the left and look for the intersecting column designated by '73' (for 1973). The result on the version titled "S&P Index Only" is 6, reflecting an annual compounded return of 6% over that 23 year period. Looking out another 9 years the number drops to 2% for an after tax, inflation adjusted return over 32 years.

There is a thin black diagonal line going from the top left to the lower right. This line shows you what the returns are 20 years after an initial investment. This will help you see what returns have been over the "long run" of 20 years.

Also note the color of the cell represents the level of the return. If the annual return is less than 0%, the cell is shaded red. When the return is between 0% and 3%, the shading is pink. Blue is used for the range 3% to 7%, light green when the returns are between 7% and 10%, and dark green indicates annual returns in excess of 10%. This enables us to look at the big picture. Whereas, long-term returns tend to be shaded blue, shorter-term periods use all of the colors.

As well, note that our original number 6 mentioned above was presented with a black-colored font, while some of the numbers are presented in white. If the P/E ratio for the ending year is higher than the P/E for the starting year-representing rising P/E ratios-the number is black. For lower P/E ratios, the color is white. In general, red and pink most often have white numbers and the greens and blues share a space with black numbers. The P/E ratio for each year is presented along the left side of the page and along the top of the chart.

Lastly, there's additional data included on the chart. On the left side of the page, note the middle column. As well, on the top of the page, note the middle row. Both series represent the index values for each year. This is used to calculate the compounded return from the start period to the end period. Along the bottom of the page, we've included the index value, dividend yield, inflation (Consumer Price Index), real GDP, nominal GDP, and the ten-year annual compounded average for both GDP measures. For the index value, keep in mind that the S&P 500 Index value for each year represents the average across all trading days of the year.

Along the right, there's an arbitrary list of developments for each of the past 103 years. In compiling the list of historical milestones, it's quite interesting to reflect upon the past century and recall that the gurus of the 1990's actually believed that we were in a "New Economy" era. Looking at the historical events, it could be argued that almost every period had a reason to be called a "New Economy." But that's an argument for another chapter.

The Investment Matrix Revelations
As we consider the story that the matrix begins to tell, several observations are initially apparent. There are clear patterns of returns relating to the secular bull and secular bear cycles. The periods of red and pink alternate with periods of blue and green. Once the new period starts, it tends to persist for long periods of time. Though the very long-term returns have been positive and near average, investment horizons of ten years, twenty years, and even longer aren't long enough to ensure positive or acceptable returns.

Note also that we've recently completed the longest run of green (very high market return) years in the past century. Though we've had a couple of down (red) years lately, it has hardly helped to restore the long-term average to "average." We have quite a distance to go to complete what the mathematicians refer to as "regressing to the mean." As you look back over the past 100 years, there has never been a period where "the red bear" stopped after a few short years and morphed into a "green bull."

Secondly, when you look at the Taxpayer Real, which is what you experience in your actual accounts, you will notice that the returns tend to be in the 3-5% range after long periods of time. Often real returns are 2% or less over multiple decades. Again, the charts clearly show the most important thing you can do to positively affect your long term returns is to begin investing in times of low P/E ratios.

The Matrix assumes an estimate of each year's taxes at the then current rates over this period (details below). We are aware that the income tax did not exist in 1901. This was a tricky number to assume, as taxes on stocks are comprised of both long term and short term gains, and are taxed at different rates for different times. Some of you pay additional state taxes. While we estimated taxes for each individual year, the average over time was about 20%.

Why not just assume all long-term gains? If you buy your stocks through mutual funds, as most individuals do, then you are probably seeing a lot of turnover in your portfolio. Remember Peter Lynch of Magellan fame? His reported average holding period was about 7 months during the 70's. Some of you will pay higher taxes, and some of you will pay lower, depending upon your investment styles. The recent average we assume is around 20%.You can adjust your expectations accordingly.

Now, what can we learn from these tables?

First, there are very clear periods when returns are better than others. These relate to secular bull and bear markets. No big insight there. But what you should notice is the correlation with P/E ratios. In general, when P/E ratios begin to rise, you want to be in the stock market. When they are falling, total returns over the next decade will be below par. (More on that phenomenon below.)

With the exception of WWII, when these periods of falling P/E ratios start, they just keep going until the P/E ratios top out. Generally, this topping period comes prior to a recession.

Can you use the P/E ratios to signal a precise turn from a secular bull to a secular bear? No, but you can use them to assist you in confirming other signals. And once that turn has begun, the historical evidence is that the trend continues. Investors are advised to change their stock investing habits. As noted above, there will be bear market rallies which will momentarily halt the decline of the P/E ratios. These always end as reversion to the mean (trend) is simply too strong a force.

Second, the Investment Matrix shows the high probability that a secular bear is currently in progress. High and falling P/E ratios, along with negative returns, are always associated with the beginning of such markets. When you let your eyes follow along the tables, you can see those "red" periods when annual gains were negative. Look at the corresponding P/E ratio. If it is high, it historically has correlated with the beginning of a secular bear, which always takes years to work itself out. Fighting this trend is frustrating at best.

When Can We Make Long Term Money In Stocks Again?
When can you profitably begin to be a long term investor, even in a secular bear market? Look at the tables. You have excellent chances of getting above average returns from the stock market if you buy when P/E ratios are 10-12 or below. You might have to suffer in the short term, but long term you will probably be OK. (I will deal with stock market investment strategies at length in a later chapter.)

For index investors, a good strategy would be to start averaging in when the market values begin approaching a P/E of 10-12. Even in the worst of the Depression, you would have done well over the next 20 years using this strategy. Investors who want to own individual stocks should focus on stocks with deep value and rising dividends, although the evidence indicates you will have periods where you will still need patience.

Death and Taxes
If you look at just the nominal returns without thinking about taxes, some would make the case that trying to time the market is pointless. Over enough time, the returns tend to be the same. And we agree, if you have 50 years, time can heal a lot of mistakes. Historically, investing through full cycles would give you a 10% compound return after many decades, and 6-7% in inflation adjusted terms.

However, if you take into account inflation, transaction costs and taxes, real in-your-account returns tend to be in the 3% annual average range. And if you begin to invest at the beginning of a secular bear, real returns over the next 20 years are likely to be negative! You lose buying power.

Let's look at some other points. First, these tables include dividends. The 6-7% returns show up over time primarily because much of the last century had very high dividends of 4% or more. Given that dividends are under 2% or non-existent for many NASDAQ stocks, the 3% long-term return number becomes far more realistic. Periods of high dividends greatly increase the return potential over using simple S&P 500 Index returns.

Second, inflation did a great deal to mask the seriousness of the 1970 bear markets. It took 16 years for the index to make new highs after 1966, but it was another 10 years, or 1992, before investors saw a rise in their actual buying power in terms of the S&P 500 index.

On the table, you see that compound returns over the 26 years from 1966 to 1992 was 8% without inflation and 2% taking into account inflation. If you take into account taxes and other costs the return to the investor was zero. For a period of 26 years, investors in index funds did not see a real increase in their buying power.

The bulk of earnings on this table over that period came from dividends. The compounding effect of dividends upon returns was huge.

The 8% returns an investor apparently got from 1966 through 1992 depended largely upon inflation. The 2% real returns are almost entirely due to dividends. During much of that period, dividends were in the 4-5% range.

Today, dividends on the S&P are less than 2%, instead of the 4-5% of the 70's. Further, we are not in a period of high inflation, although that may change by the end of the decade. The clear implication is that we are facing a period where stock market returns are going to be difficult.

If you look at the tax-deferred account real returns table for the period of 1966 through 1992 period, the after-inflation return numbers for the majority of that period are negative for a long time, until you begin to get to periods of low P/E ratios.

Now, look forward in time from any year in the 70's when P/E ratios were above 10. Figure out when you want to be able to use your investments for retirement. See if there is enough growth and time to get you to where you want to be.

If you expect to retire in 10 years, it is very unsafe to assume a 5-6% return on the average stock or index fund from where we are today. The table suggests it might even be unsafe to assume 2%!

How can we even think that stocks might not compound at 2% a year over the next ten years? It is because there has only been one time when investors have made more than a 2% real return (after taxes and other costs) over the next ten years when P/E ratios started over 21, which is easily where they are today (no matter who is figuring them). That one lone example is from the mid-90's through today. If we are right and returns become flat, then even that one period will turn out to be closer to 2%.

If you are using a standard retirement planning software program, and it asks you to assume how much you are going to get from stocks, you had better not be using 10% or even 5% if you are planning on retiring in 10 or 20 years. Yes, that means the when General Motors assumes they will get 10% on their pension portfolios, they are smoking funny smelling cigarettes. If 50% or so of their portfolio is in bonds, and we know how low those returns are, that means they assume that stocks will be returning 15% or more over the next 10 years.

Now, don't jump off that ledge yet. This doesn't mean you can't make 5-8% on your portfolio. It just means you have to look at alternatives to traditional buy and hold mutual funds. Value will rule. Think dividends. Absolute returns from bonds and specialized funds will be critical to the growth of your portfolio.

One last and major point: these numbers are all averages. That means 50% of investors will do worse than the numbers suggested on these tables. Of course, all of my readers are above average, but you might want to warn your brother-in-law. Just food for thought.

"What type of returns should you expect from the stock market for the next 5, 10, or 20 years?"

(This next section is authored by John Mauldin, as it is a tad on the acerbic side and Ed is a rather gentle soul.)

Over the long-term the Ibbotson study, used by stock market cheerleaders everywhere, says we should expect to make real returns of 6-7%. This statistic is used by brokers and fund managers who urge investors to buy and hold. Maybe more to the sales point, it is used by them to urge investors to buy some more stocks or mutual fund shares today and hold them as well. If you just keep buying, the study says you will get your reward, by and by.

This is the sweet buy and buy sales pitch. The Ibbotson study (and numerous similar studies) is one of the most misused pieces of market propaganda ever foisted on innocent investors. If I thought for one minute you really could get 7% compound annualized returns over the next 20 years by simply buying and holding, I would agree that it would be a smart thing to do.

I cannot tell you how many soon-to-be-retired couples I have talked to, after their retirement savings have been hit 30-40-50% and their comfortable retirement dreams are shattered, who tell me their brokers or advisors told them if they just hold on the market would come back. Soon, they are promised. These were the investment professionals they trusted and they assumed had done their homework.

Now they know these guys flunked Stock Market Returns 101, or possibly skipped class in order to attend lectures by Jack Grubman on "How To Buy Telecommunications Stocks." Today I give you the class notes they should have shown you.

The Most Dangerous Threat to Your Retirement
Typical is the email I got from a reader. Quote:

"My wife and I just heard another presentation by an investment firm recommending that retired people, needing income from their sheltered funds, place enough assets in fixed instruments for 5 years living expenses and the rest in stock funds. The hope is that within 5 years, there will be an upturn such that stock funds can be sold at a gain, from which to draw income. Ibbotson data was, of course, used to show how unlikely it was for there to be many consecutive years of down markets. The firm had a CPA and several financial advisors who had been working in the field for 20 - 30 years.

"It drove me nuts also, especially at this meeting where heads were nodding around the room as these advisors (looking for people to give them their money to manage) explained how scientific their approach was. The CPA member of the firm said (in comparison to 1966 -1982) that the market could be that bad or even worse, but that this was very unlikely, and went on to recommend the strategy described above."

Let's review this for a moment. I will leave aside the question of making a one size fits all recommendation for retirees, as I assume such stupidity is self-evident. That alone should be enough to make you run, not walk, to the exits.

In 1976, a young Roger Ibbotson co-authored a research paper predicting that during the following two decades the stock market would produce a return of about 10% a year, and that the Dow Jones Industrial Average would hit 10,000 in 1999. Ibbotson, now a professor at Yale, currently forecasts a compounded return on stocks during the next two decades of 9.4% - about 1 percentage point a year lower than his earlier projections.

"I'm neither an optimist nor a pessimist," Ibbotson said recently in an interview. "I'm a scientist, and I am not telling people to buy or sell stocks now. I'm saying that over the long run stocks will outperform bonds by about four percentage points a year." (from AdvisorSites, Inc.)

It turned out Ibbotson was right about 1999, and with the imprimatur of a Yale professor, investment managers everywhere use this "scientific" study to show investors why they should put money in the stock market and leave it. (I am not sure how economists get to be scientists, or how investment predictions can be scientific, but that is a debate for another time.)

If the S&P were to grow at 9.4% for the next two decades, it would be in the range of 4,500 and the Dow would be at 42,000 or so in 2023 (give or take a few thousand). Of course, that's starting at today's market values. If we start out with the market tops in 2000, we get around 8,200 and 63,000 respectively in 2020. Thus, investors shouldn't worry about the short term. Ibbotson assures us, as a scientist, that things will get better buy and buy.

The Investment Matrix clearly demonstrates why you should leave the room whenever an investment advisor brings out this study to sell you on an investment strategy. If your advisor actually believes this nonsense, then this will help you understand why you should fire him. (That should get me a few letters.)

There may be reasons to think the markets might go up, but the Ibbotson study is not one of them, in my opinion. Further, over the next 70 years, the market may in fact rise 9.4% a year. But to suggest to retirees it will do so over the next few years based upon "scientific analysis" is irresponsible and misleading.

Let's start our analysis in 1976, the year Ibbotson did the study. (I could make a much better case starting with another year, but 1976 works just fine.) From 1976 through 2002, the S&P 500 returned 12% a year (including dividends), even better than Ibbotson predicted, and after a rather significant drop over the last few years. However, 5% of that annual return is due simply to inflation. In real, inflation adjusted terms the S&P was up 7% a year.

The Price to Earnings (P/E) ratio was a rather low 12 in 1976. It ended up around 22 last year, using pro forma numbers. Thus almost half the return from the last 26 years has been because investors value a dollar of earnings almost twice as much in 2003 as they did in 1976.

At a similar P/E ratio to 1976, the S&P would be less than 500 today (around 466 or so as I glance at the screen, again using pro forma earnings numbers.) Thus, without increased investor optimism, the compound growth would be around 6.3%-7% over the last 26 years, or only a few points over inflation during that time. The point is not the exact number but that a significant part of the growth in the stock market is due to increased P/E valuations.

In fact, if you back out dividends, the growth is almost entirely due to inflation and increased P/E valuations. The stock market has been a good investment since 1976 primarily because of these two factors. The question that investors must ask today is, "To what extent will these two factors, plus dividends, contribute to the return from the stock market over the next 5-10-20 years?"

How to Lose 20% in Five Years - Guaranteed
Before I attempt to answer that, let's look at the advice the investment managers were suggesting to retirees at the seminar my reader attended. Assume that you can make 5% (today) on your investment portfolio. You can take that 5% and live on it in retirement (plus social security and any pensions) and not touch your original principal. It doesn't make any difference in this example what the amount is. I simply assume you live on a budget of what you actually get.

If that 5% is what you need for the next five years, then according to the analysis given at the seminar, you will need to put about 22% or so of your savings in bonds, which will be consumed over the next five years (remember the 22% will grow because of interest). The other 78% or so will be put in stocks. Since the Ibbotson studies show stocks grow around an average of 9.4% per year, your total portfolio will have grown to122% of where it is today. For this advice, we want you to pay us 2% a year.

(And now back to the collaboration with Ed.)

Slip-Sliding Away

"The more you near your destination, the more you slip-slide away." - Paul Simon

The long run profits we read about in the brochures don't seem to match what we see in our accounts. The closer we get to retirement and the need for those funds, the more those profits seem to slip away

Before we start looking at cycles, let's explore the impact of dividends, transaction costs, slippage, taxes and other factors on total return.

Ever notice how quickly we're reminded, while looking at the change in the index or basket of stocks, not to forget the added return from the dividends? As we seek to translate the language of benchmark returns into changes in our account balances, let's also not forget a few other components. While annual dividends have averaged 4.4% over the course of the past century, transaction costs and taxes have imposed their share of impact on the portfolio as well.

For individual investors, taxes can affect the realized return. To provide a reasonable assessment of the impact of taxes, we considered several factors and included a number of simplifying assumptions. The objective was to estimate the effect on a typical taxpayer. In general, the average tax rate was approximately 20% across the entire period starting in 1913, when the income tax was introduced.

For each year, we assumed that 80% of gains were long-term capital gains and 20% were short-term capital gains. Only 90% of gains each year were realized and the long-term capital gain portion was lagged by one-year to simulate the effect of longer holding periods. For a measure of conservatism, 10% of gains are never taxed. Most of the capital losses are used to offset gains in future years. Dividends were assumed to be taxed at the short-term rate.

Transaction costs include: (a) commissions, (b) asset management fees, (c) bid/ask spreads, (d) execution slippage, (e) and lots of numerous extra costs. Commissions are well recognized by most investors as a cost of buying and selling stocks or mutual funds. The commission cost can be-and certainly was historically-greater for individual investors than for larger institutional investors (i.e. pension plans, mutual funds, etc.) Even with today's low rates, for active and/or small traders, they can be very significant.

Asset management fees are charges levied by an advisor, the investment fund, trustees, the pension fund managers and/or other constituents in the investment process. These can run anywhere from 0.5% to 3%. Mutual fund fees of 2% or more are quite common. (As asset managers, we are not against fees, as that is how we make our living. But we do think investors should get a "bang" for their commission "buck.")

The third cost, bid/ask spreads, represents the difference between the price that one pays for a stock and the price at which the stock could be sold at the same time. Index returns are based upon the last price traded for each stock, some on "the bid" (the price at which one can sell) and some on "the ask" (the price at which one can buy). We can refer to the blend of bid and ask prices as the "mid" price-averaging near the middle. However, investors bear the cost within their account or mutual fund of slightly higher prices for purchases and slightly lower prices for sales.

The cost of the spread is often far more than the commissions. There are studies beginning to surface which shows the cost of spreads is actually increasing after the conversion to decimalization of stock prices last year, which was NOT what was expected.

The fourth element listed above, slippage, affects larger buyers of stock more so than individual investors. While large accounts may pay less in commissions, some of the advantages of larger scale asset management require the often under-recognized costs of scale. Slippage is the impact of buying or selling hundreds of thousands of shares-the average cost of completing a large purchase in comparison to the market price for a few shares of a stock. When large buyers of a stock, a mutual fund for example, decide to buy or sell a position, the size of the order can push the market price in one direction or another. Slippage is the difference in the average price when buying or selling 100 shares compared to buying or selling 100,000 shares. If you are a large manager trying to beat an index, or a hedge fund getting a piece of the profits, we can guarantee you that slippage is the cause of a great deal of frustration, if not acrimony, on the trading floor.

Finally, you have lots of hidden costs. Account opening fees and loads can add up. Funds of all types have auditing and accounting fees, which are passed directly to the fund and thus to investors. Mutual funds have "independent boards" whose members must be paid. Most off-shore hedge funds are required to have one, if not two, independent directors, who get small fees. What about custodial or administrative fees from your fund? Is there a consultant in the mix? Does your fund pay higher commissions (so-called soft dollar arrangements) to get access to research or free rent and technology? (This happens a LOT more than you think. It is a way to pass operating expenses to the fund without showing the actual expense. Investors would object to a line item that says "rent" but never see the extra penny on the commission or the spread.) Attorney fees are often fund related costs.

If you are a typical individual investor, you have your own accounting costs, investment newsletters, books, planners, consultants and a host of investment related expenses. That is not to say that each of them are not necessary to do your job as manager of your portfolio, but they do cost money. While these are not always directly deducted from your investment accounts, they are an expense never-the-less.

Our analysis in the "Tax-Payer Real" chart assumed that the total cost of commissions, asset management fees, bid/ask spreads, and execution slippage equaled 2% per year. Although there are a few (somewhat limited) examples of those investors that can demonstrate a lower overall transaction cost on their stock investments, most professional investors have indicated that we are being too conservative-the effect of which would overstate the returns in the matrix. We believe that a rate of 2% is reasonable, with a bias toward being conservative. With current dividend yields averaging considerably less than 2%, the net effect of transaction costs may well exceed the benefit of dividends.

Paris, Geneva and Points Beyond
I have to go to Geneva for business, so I will leave a few days early to go to Paris to visit with my friend Bill Bonner in his countryside chateau, otherwise known as a money pit. His new book, The Day of Financial Reckoning, will soon be out and I look forward to a few good vintages and conversation. I will be available both in Paris and Geneva for a limited number of meetings. My host, Constantin Felder of Safra Banque in Geneva, may be arranging a more formal gathering as well. I will be available in Paris on Monday, July 21 and will be in Geneva for the next two days. I introduced Constantin to Texas barbecue when he was here last month and he promises to reciprocate with a taste of the local cuisine.

Then I travel to Boston for a day to meet with a hedge fund (Monday, July 28) and on to Halifax for a two week working vacation. I have promised my bride some relief from the Texas heat, so we will see if I can actually work outside the office.

I will also be in San Francisco August 13-17 at the 2003 Agora Wealth Symposium. This should be a very interesting conference for active investors. You can learn more by going to http://www.agora-inc.com/AGW03/home.cfm?code=18. Again, I will set aside time to meet with investors. You can email me (if you have not already done so) if you are interested in meeting. I will be speaking at the New Orleans investment conference October 18-21. More details later.

Many thanks to Art Cashin of CNBC fame for allowing me to follow him around on the New York Stock Exchange floor. As well as head trader for UBS PaineWebber, he is also a NYSE governor. This means he is part sheriff, part justice of the peace on the NYSE. I was amazed at the real authority these elected members have to police the place. To watch him gave me a great deal more confidence in the fairness of the exchanges.

And yes, (assuming it is still culturally permissible to compliment a lady) Sue Herera is as pretty and gracious in person as she appears to be on TV.

Tonight is a guy's night out, so I and the boys (9 and 14) will be looking for meat and fun. Time to run, and remember the word's of John Ruskin, "The highest reward for a man's toil is not what he gets for it, but what he becomes."

Your hoping to get the book finished in three weeks analyst,