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Despite the poor December performance, the total returns from October through December 31st were not too bad compared to the S&P 500.

Many of the questions in this month’s issue came from December’s client meetings in Chicago.

It is possible for new bull markets to emerge from high P/E levels. Earnings are cyclical, so when earnings decline in a recession, it can mark a very good buying opportunity despite high P/Es.

An examination is made of the previous year’s leaders and laggards to see if success could have been attained by buying last years big winners (or the big losers).

Assessing Market Risk. We see minor or minimal risk from the economy, inflation, and earnings. But, terrorist attacks and valuations could be more significant risk. Iraq is a moderate short term risk.

It has so far been a great period for the October bounce stocks (with a big boost for the market itself).

Many of the questions in this month’s issue came from November’s client meetings in San Francisco.

A closer look at the relationship between Consumer Confidence and the NASDAQ over the last three years.

Thermal pollution time again. Leuthold’s New Year predictions for 2003.

November’s moderately positive cash flow ends five consecutive months of net redemptions.

Renaming the Paid To Play Equity Portfolio this month. New name “Select Industries” Equity Portfolio better describes the methodology which drives the construction of this all-equity portfolio.

We will begin regular coverage of our Homeland Security Theme in next month’s Blue Book—Equity Strategies.

You may notice we have raised the buy and sell zone going back to 1997. The reason for this adjustment becomes pretty clear when you look at how the dollar volume of big block net selling has been trending upward since 1997.

Buy now to play January effect. Every year, over the last ten years, small caps have beaten the large caps in December!

While short interest has retreated slightly, it still remains quite high, indicating there may be more upside pressure from short covering.

Last month, we had a request for technical readings on the major market indices. Being a long time card carrying member of the Market Technicians Association, I decided I should oblige.

An explanation herein, with the use of our trusty histograms.

Earnings are rebounding strongly. S&P operating earnings estimates are up 21% from 2001 to 2002, and up 23% from 2002 and 2003. Severe cost cutting may not be fully factored into analyst estimates. Look for upside earning surprise.

VLT Momentum, a long term technical measure, recorded buy signals on S&P 500 and DJIA. This is a very reliable indicator.

YTD instances of High Volatility (50%) is still well above the 2000-2001 levels. It is, in fact, the highest volatility reading since 1938, and the fifth highest since 1900.