4th Quarter 2001 Newsletter
Looking back over the year 2001, there seemed to be two distinct and separate environments. Indeed, perhaps we will be marking many
things as either “pre-” or “post-” September 11th for years to come.

Though we began the year with high hopes, the first six months of 2001 were disappointing, with waning corporate earnings and
deteriorating economic conditions, despite aggressive Fed easing. Just when a glimmer of recovery emerged early in the third quarter,
the horrific attacks of September 11th drove markets to new lows and thrust the U.S. economy deeper, and officially, into recession.

The fourth quarter of 2001 had a distinctly different feel – whereas ‘no news was bad news’ for most of 2001, in recent months equity
markets have come bounding back despite mixed economic, corporate and international news. For the quarter ending December 31,
2001 the S&P 500 rose 10.7%, while the Dow Jones Industrial Average advanced 13.9%.  The NASDAQ nearly erased its third quarter
loss of 30.6% by posting a gain of 30.1% during the fourth quarter. Bond markets were largely flat, with the Lehman Aggregate Index
returning 0.04% for the quarter.

Despite the quarter’s strong recovery, the S&P 500, DJIA and NASDAQ all finished the year in the red.  For the year 2001, the S&P 500,
DJIA and NASDAQ returned  –11.9%, –5.5% and –21.1%, respectively
2, delivering the worst two-year period for the DJIA since 1977-
1978 and the worst for the S&P500 since 1973-1974.

The year also unquestionably demonstrated the diversifying and stabilizing effect of fixed income securities. After many investors
shunned bonds during the 90s bull market, bonds out-performed stocks two years in a row in 2000 and 2001. However, just last month
we were reminded that bonds are not risk free when the Lehman Aggregate Index tumbled 2% over just a few weeks, eroding some of its
previous gains to end the year at 8.4%.

The recent rebound notwithstanding, the turmoil of the past two years has tempered the exuberance of many investors. After markets
plummeted on September 17th, the gut reaction for many was to sell. However, just two weeks later markets had recovered their losses
and begun the fourth quarter rally.
5  For those investors without perfect foresight, the best course of action was to adhere to long term
objectives and stay the course. These disciplined investors were rewarded for their perseverance in the fourth quarter, with equity
markets providing investors with the best returns since the height of the bull market in the fourth quarter of 1999.

What can we expect for 2002? With eleven successive Fed easings last year and additional fiscal stimulus on its way, the road has been
paved for recovery. Over the past 50 years the average recession lasted 11 months, and the longest lasted 16 months. With the U.S.
nine months into a recession, the economy will likely begin its recovery in mid-2002, and corporate profits should experience at least
moderate growth this year.   We believe that, in this more moderate return environment, a thoughtful, disciplined and well-diversified
strategy is needed to meet your financial goals, and that your portfolio is well positioned to meet the challenges ahead. As always, we
welcome the opportunity to review with you your portfolio as well as your financial objectives.

Best wishes for health and happiness in the New Year.


1   BARRA RogersCasey (Q4 2001 Commentary)
2  BARRA RogersCasey (Q4 2001 Commentary)
3  Wall Street Journal, January 2, 2002
4  BARRA RogersCasey (Q4 2001 Commentary)
5  Wall Street Journal, December 30, 2001
6  Standard & Poor’s (Q4 2001 Commentary)
7  Litman/Gregory  Asset Management (Q4 2001 Commentary)
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