www.sierratimes.com Stock Market Overview Cambridge Asset Management

By Martin & Bart Siegel, CPA, CFP We continue to use our sailing analogies to communicate to our readers the way we approach the market. The ocean is an unforgiving taskmaster, as well as a limitless source of riches. I am sure you can come up with your analogies, but they all come down to the basic laws of nature, and how we adapt to them. Whether you are a sailor, an explorer, a pilot, or even a hunter, you need a compass, or map, to know where you are. Our compass is the profile of the 30 stocks that make up the Dow Jones Industrial Averages. We also monitor the Standard and Poor, and Mid-cap averages. They all pretty much track each other. We monitor the percentage of stocks that are rated buys, holds, and sells, according to our criteria. These indices do not show any signs of dramatic deterioration, despite all of the confusion, and anxiety. In our opinion the stock market is exhibiting remarkable stability, and order.

It has been, and continues to be our strategic decision, that we are witnessing a broadening bottom that has been unfolding over the past months. The final test is going to occur this week when President Bush decides to attack Iraq. Historically, the first reaction in a wartime scenario has been a brief relief rally as we get past the initial confusion, and events begin to unfold. After this initial rally there is a period of consolidation, and filling, as the future unfolds.

There are presently three important elements effecting our economic decisions. These elements consist of the uncertainty over the war, President Bush’s economic stimulus plan, and the rate of inflation. As you know we are on the brink of a decision. Every indication is that the war is imminent. Depending on whom you believe this will either be a blood bath, or it will be over shortly after it begins. There are many who expect the Iraqi army to surrender upon declaration of war. No one has predicted anything other than an American dominated military victory. The cost in time, money, and lives are the variables. Presently many capital investment plans are on hold because of the tax advantages being anticipated in President Bush’s proposed tax package. His proposed tax package is designed to stimulate the economy, bolster the stock market, provide incentives to work harder, and take investment risks. Lastly the greatest contributor to inflation in recent months has been the increase in the cost of energy. The latest report on the oil picture is that Venezuela is producing, and delivering, oil at the rate of 3 million barrels a day. OPEC has assured us that they will deliver the oil that we need. Some estimates predict that a favorable resolution to the Iraqi crisis will result in oil falling into the $20 a barrel range. The other indicators of inflation show that deflation is the greater risk. Interest rates continue to remain at historically low levels. The recasting of mortgages has produced a very dramatic infusion of hundreds of billions of dollars into our economy. Sixty percent of those that hold mortgages have refinanced.

Although the economy has not responded as dramatically as we would like, there is continued evidence of economic growth. After pushing near recent lows, Wall Street staged its strongest advance on increased trading volume in five months. This surprised many that doubted the market could rally given investors’ fear of war. The investors’ unwillingness to sell stocks implies that they believe the economy is not that bad, and they expect things to improve. Positive factors likely to contribute to a strengthening economy include low interest rates, an expanding money supply, and the end of a three year cycle of low investment in computers, plant, and equipment.

From a different point of view we have strong evidence that America retains its lead in invention, and innovation. The new Intel chips, the science of nano technology, and the shift from silicone to carbon based technologies implies dramatic improvements in the speed, and applications, of computers. Wait till you hear the reviews on Windows 2003. Early indications are that Bill Gates did it again. We are also beginning to come to grips with hybrid automobile propulsion systems, and hydrogen cell fusion.

Stay strong, and if you choose optimistic. If you are nervous it is not unjustified. Life is not without risk and that there may be some rough seas ahead. On the other hand you also have ample reason to be positive. We at Cambridge find it a heck of a lot more fun anticipating good times ahead. Don’t underestimate the presidential election cycle. Act responsible, remain diversified, don’t take risks you can’t afford, live within your means, and try to enjoy life.

jacksonville.bizjournals.com From the March 14, 2003 print edition Devan Stuart  

Kuhn Flowers has 14 drivers delivering bouquets all over the city. But that service for its customers is causing the florist some gas pains. Rising fuel prices have driven Kuhn's monthly gas bill to $7,800 from $6,000, a 30 percent increase, said Bill Cutting, who owns Kuhn. For now, Cutting is absorbing the extra cost and refuses to change delivery routes or ask customers to pick up their flowers rather than have them delivered.

"It's something you live with for awhile," he said. But he added that "if it goes up too much, we'll have to pass it on to customers."

Throughout Northeast Florida businesses large and small are struggling to cope with some of the highest fuel prices they've seen in years.

War jitters alone typically raise the price of crude oil by about $5 a barrel, experts say. By some estimates, the war premium currently is $10 to $12 a barrel. For each dollar-a-barrel increase in crude oil, gasoline prices jump 2.5 cents a gallon.

The nation's worsening conflict with Iraq adds to what insiders call a "perfect storm" of recent events pushing up gas prices and straining supply, said Buzz Hoover, vice president of petroleum supply for Jacksonville-based Gate Petroleum Co.

In December, oil workers in Venezuela, which accounts for 14 percent of U.S. petroleum imports and supplies the East Coast, kicked off a two-month strike.

Japan is also sucking up more of the world's oil supplies, the result of a scandal at Tokyo Electric Power Co., which has admitted it failed to accurately report cracks at its nuclear reactors in the late 1980s and 1990s. Japan began shutting down reactors, increasing the nation's crude oil imports by nearly 300,000 barrels a day.

Those factors, combined with an unusually cold winter, have reduced the United States' crude oil inventory to a 27-year low. And even as the push to decrease U.S. dependence on Middle Eastern oil intensifies, America's aging oil fields are producing less.

"The Saudis are about the only ones that have the capacity," Hoover said. "But that's not enough to cover all the shortage if we had any sustained loss of Iraqi crude."

Today, world demand is 77 million barrels a day. The 10-nation Vienna, Austria-based Organization of Petroleum Exporting Countries, which includes Iraq, pumps 24.5 million barrels a day. OPEC officials say the organization would cover any potential shortfall.

But Gate's Hoover points out consumer panic could worsen an already bad situation. Industry statistics show the average driver typically is riding on a third of a tank of gas.

"If everyone decided to fill up at the same time, thinking [gasoline] isn't going to be there in a week, it would double the world's demand," Hoover said.

Sharing the burden

Rising costs are getting tougher to swallow for area businesses of all sizes that use large amounts of fuel, be it gasoline, diesel or jet fuel.

"I'm going to be eating less steaks and more hot dogs if this keeps up," said Dale Snodgrass, a retired U.S. Navy captain and owner of DS Airshows Inc. in St. Augustine.

He'll have to save a lot of lunch money to help pay for the 500 gallons of fuel his F-8 Sabre, a Korean-era fighter jet, burns in an hour. Snodgrass flies the jet, his Beach Baron or Piper Super Cub in 18 air shows a year, including the annual Jacksonville Sea and Sky Spectacular. He racked up a $100,000 fuel bill last year and projects he'll spend $120,000 this year. Fueling up in Tampa earlier this week, Snodgrass paid $3.45 a gallon, compared with last year's top price of $2.85 a gallon.

"For me, a 10-cents, 20-cents or 30-cents jump makes a huge difference," he said. "Just like in any business, I have to pass the cost of business on to my customers. I'm having to charge more per show."

Small businesses aren't the only ones laboring under higher fuel prices. In January, Jacksonville-based CSX Transportation implemented a 2 percent surcharge to customers on fuel when prices for West Texas Intermediate Crude Oil exceeded the $28-a-barrel benchmark for 30 consecutive days.

"No one likes to see price increases," CSXT spokesman Gary Sease said. "At the same time, we hope [clients] understand that to provide the reliable, safe rail transportation they expect, we have to cover our costs."

Fuel represents nearly 8 percent of CSXT's costs. The diesel fuel it uses to power trains recently hit $1.03 a gallon, compared with 90 cents this time last year. The extra cost adds up, considering CSXT used more than 572 million gallons of diesel fuel last year to power its fleet of more than 3,500 locomotives operating in 23 states.

"That 13-cent increase becomes a major factor in our operating expenses," Sease said. "We're feeling the effects."

To help keep costs at bay, CSXT officials plan fueling stops in areas of the nation offering the lowest prices. Conservation practices already in place also help. Engineers use a formula that takes into account such factors as number of train cars, tonnage carried and type of territory the train will travel to calculate how much horsepower to use.

"Just like any smart, sensible motorist would do, we try to stretch the mileage on our locomotives," Sease said.

Waiting it out

Many business owners, particularly smaller ones, such as Kuhn's Cutting, are trying to absorb the price increases while holding the line on the prices they charge their customers. But that will become increasingly difficult if fuel prices remain high.

Individuals who use their cars for business are feeling the pain, too. Duane Guerra, a driver for Papa John's pizza restaurant on San Pablo Road, said he's paying $70 a week for gasoline, up from $60. Although he gets reimbursed for mileage, the amount Papa John's pays hasn't risen at all. That means Guerra has taken an effective $10-a-week pay cut, which may prompt him to look for another job if fuel prices remain high. "It all comes down to how much I'm making and if it's worth it."

Officials with Comfort Keepers, an in-home, non-medical care provider for the elderly, say their care givers have yet to complain about gas prices despite the fact the Internal Revenue Service hasn't raised the allowable reimbursement amount for higher gasoline prices.

"I'm sure the [price increases] are affecting them," said Ruth Patterson, care manager for Comfort Keepers. "Everyone is hoping this will be a temporary thing."

Lighting up

Public entities also are feeling the impact. Jacksonville may have to increase its $5.5 million fuel budget by $1.9 million if prices remain at current levels through September.

JEA service trucks drink 637,000 gallons of unleaded gasoline and 457,000 gallons of diesel fuel annually, an average of 91,000 gallons a month.

Since early December, JEA's fuel cost doubled, spokesman Bruce Dugan said.

JEA also burns oil to create electricity at its Northside and Talleyrand plants. Miami-based Florida Power & Light, which covers much of the state and several service areas JEA doesn't, last month proposed a rate hike to Florida's Public Service Commission. JEA officials aim to avoid rate hikes.

"It's pinching us, but it's not having any impact right now on the general public," Dugan said, noting Jacksonville consumers pay 6.8 cents a kilowatt compared to Tampa's 9.4 cents. "We're watching the interest rates and fuel prices … the two variables that affect prices of electricity."

Don't kill the messenger

Gasoline price increases in times of war or other international tensions often prompt accusations of price gouging. But Hoover contends that's a misperception. He notes Gate's costs are up 40 cents a gallon, 33 percent, but it has raised prices to its consumers 19 cents a gallon, or 13.2 percent.

"We're barely selling the gasoline for what we're paying for it, and that doesn't even begin to cover operating the stores or covering the overhead," he said.

Area gas station owners determine prices by adding 46 cents in state, local and federal taxes to the wholesale per-gallon price, then adding a 3 percent credit card fee. Owners then add enough to cover costs while remaining competitive.

Gate's sales volume remains constant, but its premium gas sales have dropped by 10 percent as customers increasingly choose midgrade or regular gasoline to stretch dollars. The same scenario happened at the time of the Gulf War.

"Premium sales dropped and really have never recovered to the level they were before the Gulf War," Hoover said.

Gate officials are banking on speculation a war likely would be short, allowing the U.S. economy to get back to normal earlier than if the conflict drags on. "If it's a two-day war, clearly prices are going to come down quicker," Hoover said. Other factors are the degree of collateral damage to Persian Gulf oil production and the stockpiles of strategic oil reserves held by a number of governments around the world, including the United States. Government officials would decide the speed and amount of reserves to release in the event of a major shortage. Gas prices would change accordingly.

Jane Bennett, Beth Davis, Jessica Gellady, Bruce Hamilton and John Snow contributed to this report.

www.zwire.com Monday 17 March, 2003 ASSOCIATED PRESS March 16, 2003

RIO DE JANEIRO, Brazil (AP) - Nearly 700 wildfires fueled by dry conditions and high winds burned out of control in Brazil's Amazon jungle Sunday despite stepped-up efforts to battle the blazes.

The number of fires burning across the state of Roraima, which borders Venezuela and Guyana, more than doubled to 686 on Sunday, according to satellite monitoring by Brazil's environmental protection agency Ibama.

"Our fight against the fires is intensifying each day, but it's very dry and very windy up here," Ibama spokeswoman Monica Gil told The Associated Press from Roraima.

Ibama said it could not give an accurate estimate of the damaged or destroyed areas until the fires are extinguished. But early last week, when only 86 fires were recorded, 25,600 acres of forest and scrub land had burned.

The fires were sparked by farmers clearing agricultural land, and quickly got out of control because of extremely dry conditions caused by the El Nino weather phenomenon, an unusual warming of parts of the equatorial Pacific Ocean.

About 330 firefighters and Ibama officials were fighting the blazes, along with three helicopters and army transport vehicles, Gil said. Another 92 firefighters were expected Monday.

The fires raged at the entrance of the Yanomami Indian reservation, home to the world's largest Stone Age tribe. On Friday, fires crossed about 2 miles into the reservation, Environment Minister Marina Silva said.

About 26,000 Yanomami live on a 25 million-acre reservation straddling the border of Brazil and Venezuela.

Meteorologists say rain is not likely for another week.

In 1998, severe dryness from El Nino led to wildfires in Roraima that burned 736,000 acres of forest and scrub. The fires eventually were extinguished by rain.

©Tyler Morning Telegraph 2003

www.winchesterstar.com By Andrew Martel The Winchester Star

The subject of war with Iraq has come up in curious places at Shenandoah University.

A resident advisor posted a survey on a hallway bulletin board to measure his floor’s support.

A business class discussed the impact of a potential war on international economics and finance.

The looming international crisis has even been a topic in a class on state and local government.

SU students say they do not discuss the possibility of war much, but they almost all have an opinion.

William Shendow, SU’s political science program chairman and director of the school’s John O. Marsh Institute for Government and Public Policy, polled 35 students in two of his entry-level political science classes three weeks ago.

In the four question survey, Shendow said he found a nearly equal distribution of those fully against the war and those fully supporting it, and then twice as many students somewhere in between.

Shendow said he starts every class with an open discussion on the latest news of the potential war.

“I’m giving all of my classes the opportunity to talk about the politics of the world around them,” Shendow said. “A war with Iraq will have an impact on their lives.”

One of Shendow’s students, a junior who was considering a run for student body president, left school earlier this semester after his reserve unit was mobilized.

The in-class survey of Shendow’s introductory political science class and his class on local government found that students outright opposed to the war slightly outnumbered students who outright support it.

The majority of students said the United States should go to war only with the endorsement of the United Nations. But 35 percent of these students added that their support would wane if more than 500 American soldiers were killed.

The biggest reason to go to war, the respondants stated, is Iraq’s possession of weapons of mass destruction. Students also think the war should be fought to lessen the threat of terrorism, free the Iraqi people, and protect U.S. oil interests in the Middle East.

The biggest reasons to stay out of a war, the students said, are the fear of both U.S. and Iraqi casualties, harm to the U.S. economy, and opposition to a preemptive assault on Iraq.

So, if the United States goes to war against Iraq, SU may not be a hotbed of anti-war protest, but there may be friction between the differing ideologies.

For now, though, the campus is largely quiet, many students say.

Freshman Andrew Greenwood said he does not discuss the prospect of war with friends often.

Greenwood’s resident advisor took a survey of his floor, which was overall in support of U.S. action, but Greenwood added that it’s an all-male floor and offers an incomplete representation of the entire campus.

“I think opinion’s divided, maybe slightly in favor,” said Greenwood, who is against the war.

Brad Tatum, Greenwood’s resident advisor, said he is not sure how he feels about the war, but he sees merit to arguments both for and against it.

Junior Brian Jones said the war is discussed often in his business classes, particularly how it would affect global markets.

He is opposed to the conflict, as are many of his classmates, he said.

“We don’t believe the war is our only option. There are other methods that can be taken,” Jones said.

Shendow said he feels opinion is divided not only among students, but faculty as well.

Support for the war varies depending on whether people study or work in the conservatory, the business school, or the College of Arts and Sciences.

Some of the quietest students are among the most opposed.

Several students in SU’s international student community say they are very much against the war, although it does not come up much within their circles.

“I don’t think international students worry about it much,” said Baola Maduro, an English as a Second Language student from Venezuela.

Maduro added that she is opposed to the war, but she feels it does not affect her as much as it would others.

Freshman Mariana Pino, from Panama, said the prospect of war has her scared, “because I’m so far from home.”

Pino said she agrees that Saddam Hussein has committed some terrible crimes, but it is not worth of an invasion of another country.

Her experiences growing up in Panama have given her a unique perspective.

“It brings back memories from when the other President Bush invaded our country,” Pino said, speaking of the U.S. siege in December 1989 to overthrow Panamanian President Manuel Noriega.

www.quicken.com Monday, March 17, 2003 00:28 AM ET  Printer-friendly version   Oil prices are sliding as more crude moves toward a thirsty U.S. market, but gasoline prices aren't expected to follow them down anytime soon, Monday's Wall Street Journal reported.

The reason: tight crude-oil supplies and production problems, particularly on the West Coast.

In California, where prices now average $2.08 a gallon, gasoline supply continues to be dogged by refinery- maintenance issues and complications surrounding the production of a new ethanol-gasoline blend. Those problems appear to be affecting supplies to other western states.

Nationally, gasoline prices are expected to reach highs, before adjusting for inflation, when the latest survey comes out today. They most recently averaged $ 1.71 a gallon of regular, just below the previous record. A prolonged oil workers' strike in Venezuela this year and fears about the impact of a possible U.S. invasion of Iraq have contributed to the bulk of the price run-up.

Inventories have dropped dangerously low in some parts of the country and will be hard to replenish quickly. The crude on the way from the Middle East won't help inventories for a month or more, and weeks more will pass before the oil is refined into gasoline and transported to service stations. The Energy Information Administration, an arm of the Department of Energy, predicts that pump prices will peak at $1.76 this year.

On Friday, crude oil fell on the New York Mercantile Exchange, in part reflecting reports that Saudi Arabia had chartered at least a dozen oil tankers for shipment to the U.S. Gulf Coast. But that oil won't reach U.S. shores until the first half of May. In the meantime, the first wave of extra Saudi oil -- shipped more than a month ago -- is expected to reach the U.S. Gulf Coast soon, said Larry Goldstein, president of Petroleum Research Foundation in New York.

Wall Street Journal Staff Reporter Alexei Barrionuevo contributed to this report.