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Current Investment Perspectives

1. The Federal Reserve continues to keep interest rates low in spite of economic recovery.  The first quarter GDP (gross domestic product) was revised down by 0.2% to 6.4%.  Yet, it is reasonable to think that the bond market continues to reflect growing inflationary pressures mounting from the record money supply growth in the fourth quarter of 2001.  In the past four weeks, the dollar has come under pressure as foreign investors choose Eurodollar investments over U.S. dollar investments.  Fundamentally, the Eurodollar fixed income investments continue to be more attractive than U.S. Treasury securities resulting in moneys leaving the U.S. and going into Euro based fixed income securities.  The Federal Reserve continues to focus on averting any deflationary collapse in the U.S. 
2. The bond market in the U.S. continues to languish as yields appear to have bottomed in the fourth quarter of 2001.  Investors must be mindful of corporate bond investments since many leading issuers have seen their respective credit rankings downgraded.  The near elimination of the commercial paper market is forcing short-term borrowers to look to commercial banks for funds keeping short-term U.S. Treasury yields low.  Managements of short-term money market funds have fewer options to improve money market yields.  Fixed income investors must look to alternative investment vehicles including preferred stock and real estate investment trusts.  Bank stocks and utility stocks offer attractive yields as well.
3. The past two years have taught many stock market investors a lifetime of lessons.  All adages apply.  The technology bubble has burst.  Irrational exuberance has turned into significant declines in market indices, mutual funds, and 401-k balances.  The build-up in market values turned into disaster and nightmares for those who “bought-in” to the hype.  The phrase “new era” investing has been eliminated.  Market participants want to recover, but the hope of fast market solutions is fading as tax losses have mounted.  This has given many investors several lifetimes of tax loss carry-forwards.
4. Value investing is in vogue.  All of the sudden people are discussing valuations.  Yet, it is even the more difficult for proponents of growth to give up on Larry Ellison (Oracle), Scott McHealy (Sun Microsystems) or Bill Gates (Microsoft).  One by one, industry disappointments continue to reinforce the market drop in the respective growth companies. 
5. The compounding effects of the collapse of Enron makes even value investing tricky as many attractive value investments get further decimated when rating services suddenly downgrade an already fallen star making the drop even more severe.  The new Wall Street research got even more dicey as the once cushy relationship with underwriters and the rating agencies became strained.  The anti-accounting and anti-research motif clouds investment research making the process even more difficult.  The credibility gap has created the most severe distrust of investment research than has ever existed before.  The attorney general of New York, Eliot Spitzer, has reached an agreement with Wall Street powerhouse Merrill Lynch as research products were skewed in favor of many of their underwritings, an age-old industry practice.  Where are the other regulatory agencies?
6. Corporate managements have enjoyed the best of all times, as they were able to steal, cheat and take from many innocent investors.  The ten-year run in the market allowed great fortunes to be amassed by management as a result of extraordinary and unprecedented market valuations of corporate stock.  The incentive compensation packages encouraged stock option and stock packages that literally took billions from the 401-k, retirement plan and mutual fund investors.  Unfortunately, this money will never come back to shareholders. 
7. The new investment model must address this.   At Robinson Investment Group, we are investing in companies that are attractively valued compared to its industry and the overall stock market.  Second, we attempt to invest in companies whose managements act responsibly.  Insider buying and company stock buy-backs are more favorable than companies whose managements are unloading shares or selling stock secondaries.  Third, we attempt to invest in companies that have favorable debt levels.  With the current low interest rate environment, companies are able to stomach higher debt levels, but the danger of high debt is trouble should interest rates rise.  Cash flow from operations is necessary in meeting debt obligations.
8. For the first time in several years, foreign markets appear to show favorable investment characteristics.  The Japanese market is demonstrating that economic growth may be on the horizon as the U.S. economic growth continues to accelerate; and hopefully the European economy will follow suit.  Japanese automobiles certainly have gained market share in the U.S. as energy prices continue to rise.  Japanese consumer electronics are being purchased supporting the several large companies including Sony and Matsushita Electric.  Any positive rebound in Japan should affect all Southeastern Asia markets favorably.
9. The overall market continues to correct.  The fact that many of the market safeguards may actually prolong the market downturn.  Another phenomenon is the number of companies leaving the NASDAQ and getting listed on the New York Stock Exchange.  Listed companies have faired better during the current market volatility.  The performance of the NASDAQ will be even more reflective of the ten largest capitalization issues that are technology companies.
10. Robinson Investment Group continues to focus on Value investment management.  Fundamental analysis is critical in making investments.  Additionally, fully- diversified stock portfolios are critical in the current market environment.

Russell L. Robinson

5301 Virginia Way, Suite 150

Brentwood, Tennessee  37027

615-242-3447

rigrobin@robinsoninvestment.com

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