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Email Version, Section 1, Sunday 03/18/2001
The Newsletter         Sunday 03/18/2001 1 of 2
Copyright 2001, All rights reserved.
Redistribution in any form is strictly prohibited.

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In This Newsletter:

Market Stats
Market Commentary - One For The Ages
Definition of the Day
Friday's Split Announcements - None
Mondays Expirations
Event Calendar - Next Week's Economic reports
Upcoming Splits for next two weeks
Successful Announcements - Last Week
New Candidates List
Expected/Likely Announcements for the Coming Week


Market Stats For the Week

Index                     Close    Change    Support   Resistance

DJIA (INDU)            9,823.41   -821.21      9,800       10,900
Nasdaq (COMPX)         1,891.03   -161.75      1,700        2,250
S&P 500 (SPX)          1,150.56   - 82.86      1,080        1,375
Russell 2000 (RUT)       441.80   - 31.85        410          508
PHLX Semi (SOX)          593.44   - 52.18        530          800

Market Commentary

One For The Ages

The South Sea Company and the Mississippi Company have nothing on
today's technology sector.  For those folks short on history, the
South Sea and Mississippi companies were two enterprises
concocted in the early 18th century to exploit the vast riches of
the New World.  What was exploited, though, were greedy, naove
investors, who bid up the shares of both companies to Rambus-esque

Well, no sense in making a short story long (I'm sure you can see
where I'm headed with this, anyway), the inflated shares in both
companies soon burst like so many distended bubbles and millions
of dollars of shareholder value vanished in a mere instance.

Now compare the South Sea and Mississippi bubbles with today's
latest bubble, and there really is no comparison, at least when it
comes to scope and forfeiture of wealth, because this latest
bubble-burst has soaked investors for trillions of dollars ($4.8
trillion to be exact), not mere millions.  What's more, the South
Sea and Mississippi bubbles were, for the most part, limited to
London and Paris, whereas today's technology bubble is limited to
the planet.

There is one notable similarity, though, and that's the presence
of unctuous hucksters promoting the merits of investing in
companies with no earnings trading at a few hundred times
negligible sales.  South Sea had Robert Harley and Mississippi had
John Law while high-tech had Mary Meeker and Joe Battipaglia.

But this is not to imply that investors are blameless; they
certainly are not, but at least they should be forgiven their
transgression because as Albert Einstein once said, "There are
only two truly infinite things, the universe and stupidity. And I
am unsure about the universe."

With that said, the latest round of investor misgivings resulted
in another bubble bursting to the tune of $900 billion this week.
This time, however, the selling wasn't limited to the formerly
high-flying Nasdaq tech issues.  On Friday, the Dow Jones
Industrial Average (INDU) plunged 207.87 points, or 2.07 percent,
to 9,823.41, as 26 of its 30 component stocks finished in the red.
Leading the downdraft were International Business Machines
(NYSE:IBM) and Pfizer (NYSE:PFE), which fell $5.46 and $1.22,
respectively.  For the week, the INDU erased 821 points, or 7.7
percent, of its value, notching its worst one-week percentage
performance since 1989.

Until last week, the blue-chip INDU issues had been bucking the
downtrend for most of the new year by consistently trading within
a 10,300 to 11,000 range.  With this week's sell-off, that range
is no more.  Now I'm looking at possible range of 9,700 to 10,300,
at least based on the weekly chart.

Chart of the Dow Jones Industrial Average:

But keep in mind, the INDU is still not in a bear market, which is
a 20 percent retracement from a 52-week high, like the other two
major market barometers.  For the INDU to be officially recognized
as being forlorn, it would have to close at 9,140 or lower, so
9,700 should be considered tenuous support at best.

As for the New Economy issues, they just kept right on selling on
Friday.  The Nasdaq Composite Index (COMPX) fell 59.85 points, or
2.57 percent, to 1,890.86, scrapping a new low unseen since
November 1998. For the week, the COMPX fell 161.87 points, or 7.9
percent, marking its seventh straight weekly decline.  The COMPX
is now trading at a 63 percent discount to its all-time high of
5,132 set back in March 2000.

Despite the COMPX's stubborn refusal to get off the canvas, some
bullish technicians think the index could soon find support, at
least according to the wedge pattern formed by the December lows
and the January highs.  Personally, I don't buy the logic because
we are only a few downticks from breaking the bottom wedge
support.  I think the 1998 lows near 1,500 seem more reasonable.

Chart of the NASDAQ Composite:

Looking at the broader market, the S&P 500 Index (SPX) fell 23.17
points, or 1.97 percent, to 1,150.39, hitting its lowest level
since mid-December 1998.  And for the week, the SPX finished off
6.7 percent.  The SPX is now trading at a 25 percent discount to
its closing high of 1,527 and at a 30 percent discount to Goldman
Sachs stock siren Abbey Joseph Cohen's year-end target of 1,650.

Needless to say, with the three major market barometers circling
the drain, the market internals on Friday were terrible.  Volume
was heavy on the NYSE due to triple-witching -- a quarterly
phenomenon that sees the simultaneous expiration of futures,
options on individual stocks and options on stock indexes.  More
than 1.5 billion shares traded on the Big Board, the fourth-
busiest day in the exchange's history.  What's more, that volume
was mostly down, with decliners beating advancers by a 21 to 10
margin.  As for the Nasdaq, volume was posted at 2.1 billions
shares with decliners beating advancers by a 26 to 11 margin.

The specific causes for Friday's declines were numerous.  As
usual, though, they could be categorized into two major areas of
concern -- earnings and economics.

On the earnings front, business software developer Oracle
(Nasdaq:ORCL) met lowered quarterly earnings estimates when it
posted $0.10 a share late Thursday.  Nevertheless, Oracle dropped
$0.63 to $14.06 on Friday, continuing a six-week slide that has
halved the company's share price.

Also late Thursday, PC giant Compaq Computer (NYSE:CPQ) warned
that it expects to report earning of $0.12 to $014 a share for the
quarter compared to the consensus estimate for $0.18.  The company
also said it would eliminate up to 5,000 jobs.  On Friday Compaq
closed down $0.50 to $18.00.

Not to be outdone, Computer Sciences Corp. (NYSE:CSC), the No. 3
U.S. computer-services provider, said that it expects to earn
$0.35 to $0.37 a share for its fourth quarter ending March 30
compared to the First Call estimate of $0.92.  Additionally, the
company said it will cut 700 to 900 jobs and take a fourth-quarter
charge of $100 to $150 million.  Computer Sciences was whacked for
$21.40 on the news to close at $32.70.

On the economic front, the Producer Price Index (PPI) edged up 0.1
percent in February, matching the consensus estimate and reversing
January's nerve-wracking 1.1 percent spike.  Meanwhile, industrial
production in February fell 0.6 percent, much worse than the
expected 0.3 percent drop.

Also on Friday, the University of Michigan consumer sentiment
survey was released.  The index inched up unexpectedly in March
after three months of sharp falls, coming in at 91.8 from 90.6 in
February.  Economists had expected the index to fall to 89.5.   At
first glance, the up-tick in consumer sentiment is surprising
until you consider that two-thirds of the survey was conducted
prior to the week's vast sell-off.

Looking to this week's economic news, all eyes will be focused on
Tuesday's Federal Reserve FOMC meeting.  Most market watchers are
anticipating a 50-basis point cut in the fed funds rate; however,
a growing minority is looking for 75-basis points.  In fact,
according to Bloomberg, nine of the 25 bond dealers who trade
directly with the Fed expect the policy-makers to lower rates by
75 basis points next week, up from none the prior week.

The bond market is also counting on an aggressive move on Tuesday.
The yield spread between short and long-term debt is once again
widening, which suggests that investors anticipate a period of
below-average short-term interest rates.  Plunging yields on
short-term government securities also reflect the flight to
quality from equities.  On Friday, the 10-year Treasury note was
up 6/32 to yield 4.77 percent while the 30-year government bond
gained 2/32 to yield 5.27 percent.

Finally, the Consumer Price Index (CPI) is scheduled for release
on Wednesday. The CPI is expected to have increased 0.1 percent in
February, off from a 0.6 percent increase in January. Less the
volatile food and energy sectors, CPI is expected to have
increased 0.2 percent, off from 0.3 percent gain in January.

As for earnings, a mixed bag of old and new is set to report this
week.  Lehman Brothers (NYSE:LEH) and Morgan Stanley Dean Witter
(NYSE:MWD) will represent the financial services sector; ConAgra
(NYSE:CAG) and Dean Foods (NYSE:DF) will represent the food
sector; and 3COM (Nasdaq:COMS), Red Hat (Nasdaq:RHAT) and Micron
Technology (NYSE:MU) will represent the technology sector. Look
for Micron's earnings release to garner the most attention because
of its considerable PC exposure.

Obviously, market sentiment this week will hinge on what the Fed
does on Tuesday.  Lately, that sentiment hasn't been very bullish.
In fact, investors yanked $6.7 billion out of U.S. stock funds in
February and likely will pull out more in March, according to fund
flow tracker Trim Tabs.  If that happens, it will be the
industry's worst two-month period since 1990.

What's more, I'm not so sure the Fed's actions on Tuesday will do
much to improve sentiment.  Should the Fed cut interest rates by
50-basis points, I think market will react with a collective
shoulder shrug and then resume selling.

On the other hand, should the Fed cut interest rates by 75-basis
points, I think we will get a spike in buying that will be short-
lived because the market is beginning to think that traders and
investors have unrealistic expectations of lower interest rates
lifting the economy (to which I concur).

Talk about a Catch-22.

Then again, sentiment could turn positive just because everyone
who has sold has sold, meaning there is little selling pressure
left.  To that end, the put-call ratio closed at Friday at 1.08,
its highest level since October 1998, when it closed at 1.11.
This could be a contrarian indictor that the market is indeed
ready to turn.

Another possible contrarian indictor is the recent parade of
talking heads in the financial press chattering about 1,500 on the
COMPX and 9,000 on the INDU.  This time last year, many of these
pundits were chattering about COMPX 6,000 and INDU 1,200.

For me to be as sure as I can reasonably be that the worst is
finally over, I would like to see at least one day of unbridled
capitulation with decliners pummeling advancers by at least a 25-
to-1 margin on volume of 1.5 billion on the NYSE and 2.5 billion
on the Nasdaq.

But then again, who wouldn't?

S.P. Brown

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Definition of the Day

Cyclical Stock

A cyclical stock is one that tends to follow along with economic
cycles. As the economy turns up, these stocks will generally rise
along with it.

For the complete definition, please go to:

Friday's Split Announcements


Mondays Expirations by Payable Date

Krispy Kreme Doughnuts (KREM) splits 2:1

Event Calendar

For the week of March 19th, 2001

None Scheduled

Trade Balance            Jan  Forecast:-$33.0B  Previous: -$33.0B
Treasury Budget          Feb  Forecast:-$44.0B  Previous: -$41.7B
FOMC Announcement             Forecast:    NA   Previous:     NA

CPI                      Feb  Forecast:  0.20%  Previous:   0.60%
Core CPI                 Feb  Forecast:  0.20%  Previous:   0.30%
Oil & Gas Inventories 16-Mar  Forecast:    NA   Previous: 285.3MB

Initial Claims        17-Mar  Forecast:   368K  Previous:    375K
Leading Indicators       Feb  Forecast: -0.20%  Previous:   0.80%
FOMC Minutes                  Forecast:    NA   Previous:     NA
Semi Book to Bill Ratio  Feb  Forecast:    NA   Previous:   0.81

ECRI Wkly Leading Idx 16-Mar  Forecast:    NA   Previous:   -4.1%

Week of March 12th
Mar 26  Existing Home Sales
Mar 26  New Home Sales
Mar 27  Durable Orders
Mar 27  Consumer Confidence
Mar 29  Initial Claims
Mar 29  GDP-Final
Mar 29  Chain Deflator-Final
Mar 29  Help-Wanted Index
Mar 30  Personal Income
Mar 30  PCE
Mar 30  Chicago PMI
Mar 30  Mich Sentiment-Rev.

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Upcoming Splits

Symbol  Company Name                Splits  Payable    Executable

AFL  - AFLAC, Inc.                    2:1  03/16/2001  03/19/2001
DYII - Dynacq International           2:1  03/16/2001  03/19/2001
EASI - Engineered Support Systems     5:4  03/16/2001  03/19/2001
KREM - Krispy Kreme Doughnuts         2:1  03/19/2001  03/20/2001
LTR  - Loews Corp.                    2:1  03/20/2001  03/21/2001
GENI - GenesisIntermedia              3:1  03/21/2001  03/22/2001
FRC  - First Republic Bank            3:2  03/22/2001  03/23/2001
RSAS - RSA Security Inc.              3:2  03/23/2001  03/26/2001
INOD  Innodata Corp.                 2:1  03/23/2001  03/26/2001
TWRI  Trendwest Resorts              3:2  03/27/2001  03/28/2001
NYCB  New York Community Bancorp     3:2  03/29/2001  03/30/2001
FSCR  Federal Screw Works            5:4  04/02/2001  04/03/2001
RMCI - Right Management Consult.      3:2  04/06/2001  04/09/2001
JP   - Jefferson Pilot                3:2  04/09/2001  04/10/2001
UCBH - UCBH Holdings                  2:1  04/10/2001  04/11/2001
GVA  - Granite Construction           3:2  04/13/2001  04/16/2001
SBL  - Symbol Technologies            3:2  04/16/2001  04/17/2001

Successful Announcement Predictions For The Past Week

                                       Date Expected
Symbol         Company                 To Announce

None             ---                       ----


New Split Candidates:

EQT - Equitable Resources, Inc.  $63.48  (-2.22)
This natural gas and energy supplier has powered higher on the
heels of a red-hot energy sector.  Due in most part to record high
gas prices, margins have expanded and so have gas stocks' prices.
EQT last split its stock 3:2 back in January of 1993 at
$52.38/share.  We are obviously back into split territory and will
keep an eye on the company's next earnings release date of 5/9/01
as the next likely trigger event for another 3:2 split



DVN - Devon Energy Corporation  $61.68  (-4.62)
Devon has its paws in most everything having to do with bringing
energy to the end user.  With energy demand skyrocketing, you bet
this stock is back into split territory.  DVN has never split its
shares but has enough authorized to enact a 2:1.  We are targeting
the firm's next earnings release date of 5/1/01 as the next
probable time for a split announcement.


Expected/Likely Announcements for the Coming Week

                                       Date Expected
Symbol         Company                 To Announce

MKC            McCormick & Company        03/21
BMET           Biomet, Incorporated       03/23


MKC - McCormick & Company  $40.00 (-1.36)

This manufacturer of spices and specialty food products has never
split its shares, but is in historic split territory for its
industry.  MKC has 160 million shares authorized and only 60
million outstanding, so a 2:1 may be in the cards.  The company
releases earnings on 3/21, which we feel would be a good time to
also announce a stock split.



BMET - Biomet, Incorporated  $39.00 (-2.38)

Deja vue.  Biomet was expected to announce a split last week during
its earnings release but it did not.  However, the company has its
Board of Dirtectors meeting on 3/23, so this may be the one.  BMET
last announced a 3:2 split back on 7/6/2000 at $38.00, so we are
right back into split territory.  The stock also weathered last
week's market storm fairly well, so it remains near all-time highs.


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