WELCOME - Vol. 7 No. 1

TIMELY INVESTMENT INFORMATION - Weekly Economic Update
======================================================

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WEEKLY UPDATE FOR: January 5, 2002

Prior Week in Review:

Financial Market Highlights:
============================

                        01/04/02     12/28/01     %Change

S&P 500                 1,172.51     1,161.03       +.99%
Dow Jones              10,250.74    10,136.99      +1.12%
NASD Comp               2,059.38     1,987.26      +3.63%
Russell 2000              499.30       493.62      +1.15%
SOX Index                 589.89       538.79      +9.48%
Value Line                378.37       372.10      +1.69%
MS Growth                 562.43       568.96      -1.15%
MS Cyclical               551.56       535.61      +2.98%
T - Bill                    1.68%        1.68%       UNCH
Long Bond                   5.57%        5.54%      +3 BP
Gold - Oz-Near Month     $279.20      $276.80      +$2.40
Silver - Oz-Near Month     $4.65        $4.50       +$.15


Economic News:
==============

Good Economic News Continues - Stock Market Responds
 Economic Recovery A Given - Slope Still In Doubt
 Modest Recovery Best Bet - Could Disappoint Some


*Chicago Purchasing Managers' Index rose to 41.4
*Institute for Supply Management Index rose to 48.2
  From November's 44.5 - See Below
*November Construction Spending rose +.8% - Second
  Consecutive monthly gain
*Jobless Claims rose +36,000 to 447,000 - Four Week
  Moving Average fell -3,500 to 409,750
*December Auto Sales eased to 16.5 million rate -
  Actual 2001 was 17.2 million - Second Best Year
*Labor Department Employment Report - December
 - Unemployment Rate rose to 5.8%
 - Nonfarm payrolls fell -124,000
 - Average Hourly Earnings rose +$.07/hr to $14.61/hr
 - Average Workweek rose +.1/hr to 34.2 hr.


As longer term subscribers know, we have long been
forecasting an economic recovery to be underway by
Spring.  Recent economic reports strongly support that
outlook, and other market participants became converts
last week, particularly given the strength in the
Institute of Supply Management's Index (formerly
known as the National Purchasing Managers' Index). And
the stock market responded positively.  For us, though,
the issue is now the slope of the recovery, which has
important market implications, at least in our opinion.

Assuming no serious exogenous event, our best bet is
for the resumption of modest economic growth, beginning
with a slightly positive first quarter, and accelerating
as the year progresses to somewhat over 3%.  We would be
pleased if that scenario plays out, but others won't,
as they are expecting a faster recovery, and a stronger
second half.  And, the disappointment would likely fall
hardest on those economically sensitive stocks which have
been bid up most recently.

Our rationale starts with the obvious - the recession,
and we are assuming it is about over so we will use the
past tense, was short and shallow.  Short and shallow
leaves less room for a "snap back" as consumer spending
really did hold up very well last year.  And, as you all
know, the consumer drives approximately two thirds of
economic activity.

While it had appeared that the labor markets were improving
nicely, and even though the latest Labor Department Report
was better than expected, the recent softness in the jobless
claims report implies that labor markets will not recover
quickly.  This is not terribly surprising, as the labor
markets lag economic activity, but it does support our view
that the early stages of recovery will likely be modest.

Further out, the role of the Federal Reserve Open Market
Committee (FOMC) becomes important.  Their next meeting is at
the end of the month, but given what we know now, it would
be very unlikely to have a further rate cut.  Best bet now
is no change, and removal of the easing bias.  But the real
issue is how quickly they raise rates, given the unprecedented
reduction over the past year.

Recently there has been some dissension at the FOMC.  Some
members believe they have moved too far too fast, so they will
be looking to "take back" some of the cuts quite quickly.
Chairman Greenspan, though, will likely be more tolerant given
his strongly held belief that productivity improvements are
real, and sustainable.  Complicating the issue still further,
is that voting members have changed.

At the moment, our view is that they will move fairly quickly
to nudge rates slightly higher, to maintain their image as
foes of inflation, particularly if the reported inflation numbers
tick up, or productivity figures deteriorate.  If we are right,
that might bother the markets some, but the economic impact of
moving rates up from such low levels should be minimal.  The
real problem would arise if the appearance was that a series of
rate increases would push short rates above 3.5% - 4.0%.  For
now, not a concern.  But, going forward, an issue.

Simply put, inflation is bad, very bad, for financial assets.
The latest year-over-year increase in average hourly earnings
was +4.2%.  But, that is at the end of a recession, so wage
pressures will likely build.  Hopefully Greenspan is right, and
productivity can improve at a 3.5% - 4.0% rate, reducing the
inflationary threat significantly.

My intent is not to be alarmist as the stock market and economy
recover.  However, for the end of a recession, not only are
wage pressures real, but stock market valuations, using the FRB's
own model, at year end were slightly overvalued already. So,
stay tuned as 2002 should be a very interesting year !



Current Weekly Calendar of Economic Data:
=========================================


Monday:
Tuesday:        Factory Orders, Consumer Credit
Wednesday:
Thursday:       Jobless Claims, Wholesale Trade
Friday:         Producer Price Index



Fresh Money Buys:
=================

In response to subscriber feedback, we have established this
section to highlight recommendations from our list that we
believe are the most attractively priced currently.  We will
limit the selections to three each week, even as our list of
recommendations changes.

American Int'l Group (AIG)                     $77.80
Fannie Mae (FNM)                               $78.45
Pfizer Inc. (PFE)                              $39.40


Original reports from the time of recommendation, are
         available on our Website at:

    http://www.stockresearch.com/archive.html


You may obtain a "second opinion" from VectorVest, a service
that provides limited access free so you may try their
service at:

    http://www.stockresearch.com/vv.html


We will not track the performance of this list as we are
already monitoring the original recommendations.  Hope
this helps.

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The foregoing has been prepared solely for informational
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