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The theory underlying the annual "Playing The Bounce" exercise is that these stocks, driven down by excessive selling late in the year will rebound when the pressure is off.

We appreciate your response to our client survey questionnaire. As of February 28th your comments were still coming in.

The evidence is building.

The vast majority of 1991 fourth quarter earnings reports have been released.

The T-bond market continued its slide in the first hald of February, extending the peak to trough decline to 60 basis points.

The S&P 500 should have been an easy mark In January, unless your portfolios were loaded down with "Oil Patch" stocks and/or "Health Care".

In 1991, two "Playing the Bounce" lists were sent to clients.

Like the summer of 1987, financial writers, brokers and investment managers are attempting to come up with reasons why it will be different this time.

"Awful" Knutson, the crusty old Norwegian curmudgeon, and father of "Evel" Knutson refuses to communicate with us.

The Leuthold Group currently incorporates 38 stock market valuation measures in its Major Trend Index (see Appendix). Currently 31 of these are at least to some degree negative.

In our January book, we stated this issue would include The Leuthold Group's "Fearless Forecasts", frivolous flights of foolishness and fantasy that parody conventional economic and market predictions.

Most of January was a downhill ride for the bond market, although high yield (junk) bonds typically moved up 2 or 3 points.

Each January we publish the gold book (Perception II) before this, the green book. So don't blame the post office this month, blame Steve Leuthold.

1991 began on a grim note.

This marks my twentieth year publishing an equity model portfolio with a sector focus.

The table on the next page is a peformance rundown for our equity market sectors (and other measures) ranked by 1991 performance.

In 1991, two "Playing the Bounce” lists were sent to clients.

Much of the January Green Book is devoted to tradition, so too is this section. We resumed this tradition two years ago and have found it to be quite interesting. We now annually conduct this exercise each January, examining the previous year's leading and lagging stock market groups.

In November, long and short rates did not move together, but in December they sure did.