Issue 14 - April 1, 2004


First Quarter 2004 ≠ Staying Focused and Staying Constructive

As the first quarter of this year draws to a close, investors have likely experienced a taste of things to come: some good news, some bad news, and some respectable forward progress. The performance of financial markets has been subdued on the heels of the robust returns of 2003; we find that to be both understandable and welcome news. The continuing economic benefits of low interest rates and low inflation coupled with high productivity and earnings have been well tested by the negative forces of election year politics, continuing terrorist threats and rising oil prices. We have also witnessed the beginning of a rotation out of the more speculative companies that fueled the rally of 2003, into companies with more predictable earnings. The fact that the broad market has been able to accommodate these adjustments along with a healthy supply of new issues without a major correction is encouraging.

Getting Beyond 1999

As the chart below demonstrates, markets do not go straight up even in raging bull or bubbly markets.

Note that the period of the late 1990ís should not be considered as the baseline for investment returns. Much of the perfection of those markets was based upon fraudulent or, at best, unsustainable factors. The quality and sustainability of todayís corporate earnings is a vast improvement over those of the late 1990ís. In addition, and more importantly, quality, sustainable earnings allow us to be successful long-term investors.

The Power of Transparency

Transparency has once again proven to be a powerful disinfectant. We are now (hopefully) approaching the last act in the accounting scandals, and the long standing lax oversight and Byzantine sales practices of mutual fund companies have finally been laid bare and renounced. This ongoing evolution of disclosure and increases in transparency are providing an extremely healthy and long overdue boost to the foundation of U.S. financial markets. As we wrote in our last note, the economic backdrop is reasonably favorable if not dynamic, and steady investors should continue to be rewarded for their faith.


In this Edition

  • First Quarter 2004

Huntington Steele

925 4th Avenue
Suite 3700
Seattle, WA 98104



Past Issues

13 - 03.02.04
2004: Encore Performance

12 - 02.03.04
Market Outlook/Cell phones

11 - 12.16.03
Auctions - eBay, US Treasury, IPOs

10- 12.02.03
Recent Economic Data
Market Implications

More Past Issues
can be found in our

Newsletter Archive


Market Highlights

  3/31/04 12/31/03 12/31/02
DJIA US 10357.7 10453.9 8341.63
S&P 500 US 1126.21 1111.92 879.82
Nasdaq US 1994.22 2003.39 1335.51
EAFE Int'l Equity 1337.07 1288.77 952.65
5 Yr Treasury 2.89 3.231 2.74
5 Yr AAA Muni 2.38 2.45 2.59
10 Yr Treasury 3.874 4.225 3.82
10 Yr AAA Muni 3.49 3.6 3.72
30 Yr Treasury 4.69 5.01 4.77
30 Yr AAA Muni 4.51 4.54 4.69
EUR Currency 1.2227 1.2612 1.0488
JPY Currency


106.92 118.69
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