Option Investor
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Daily Newsletter, Tuesday, 09/11/2001

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The Option Investor Newsletter                 Tuesday 09-11-2001
Copyright 2001, All rights reserved.                       1 of 2
Redistribution in any form strictly prohibited.

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Posted online for subscribers at http://www.OptionInvestor.com

Life As We Know It Is Over?

Exaggeration? Only time will tell. As we all are well aware Tuesday
will go down in history as a day of infamy even greater than the
attack on Pearl Harbor, the bombing of the Federal building in
Oklahoma and the Kennedy assassination. There is no precedent to the
events that occurred on Tuesday morning. The death toll is likely
to be well over 10,000 and it will be months before the pile of
rubble that was once the center of the world financial markets is
cleared. We may never know exactly how many people were killed or
who actually gave the go signal but the impacts of those airliners
will be felt for many years to come.

The financial impact of course is inconsequential compared to the
loss of life but it is going to be enormous. Not only did the World
Trade Center house major offices for dozens of brokers and banks
but also commodity exchanges, legal firms, trust companies, financial
publishers, mutual funds etc. Almost a square mile of Manhattan real
estate was demolished. The collapse of the twin 1300 ft tall towers
showered concrete and steel for a block in every direction damaging
dozens of surrounding buildings and setting them on fire from the
100,000 pounds of jet fuel that was consuming the WTC. Late news
announced that World Trade 7 collapsed around 5:30 from this damage
and several other buildings in the 20-30 story range were also in
danger of collapse. At least a dozen buildings have been rendered
unusable and will be demolished in the cleanup.

Life as we know it is over? I think that is a pretty good bet.
If you have ever traveled overseas you will understand what I am
talking about. Citizens/travelers in other countries have no civil
rights. Police and military openly carry machine guns and randomly
stop and question civilians. The rules are different. Unruly,
obnoxious, impolite or just plain uncooperative individuals are
quickly and roughly dealt with. They have learned long ago that
terrorists and hijackers must be dealt with aggressively and without
mercy and that sometimes means innocent individuals and/or bystanders
are caught up in the fray.

When four, count them, four, state of the art airliners, fully loaded
and leaving from three different airports, are hijacked by multiple
terrorists armed with knives, guns and grenades on the same day, it
is a wake up call for American security. Heads will roll on these
security errors but it will be little comfort to the families of the
victims. Americans will soon be seeing increased security, higher
visibility for security forces and untold complications for lawful
travelers. All of this will have little impact on stopping true
terrorist activities. With the Mexico and Canadian borders wide
open any real terrorist can simply walk in and setup shop. Because
the terrorist war is likely to escalate on both sides Americans will
be quickly rethinking their current open society as well as travel
plans abroad. The FAA has grounded all flights in the US until at
least noon on Wednesday. They are closing Manhattan for Wednesday and
they are saying that nobody will be allowed into the area until the
danger of other building collapses has passed and buildings farther
away can be inspected for damage from falling debris.

In Denver Colorado today the panicked public were quickly filling
food stores and stocking up on nonperishable food. Lines were out
of the parking lots of many filling stations as panicked drivers
were filling up the vehicles. Banks around the country were reporting
a run on ATM machines and several banks quickly programmed a limit
on cash withdrawals on a daily basis. Fears of lost account records
were cropping up everywhere prompted by CNBC showing burned account
records from companies like Cantor Fitzgerald, Chase and Morgan
Stanley, that were picked up on the street blocks from the WTC.

Morgan Stanley quickly went on air and squelched the rumor that all
the records were lost when their 50 floors of corporate office
space and complete trading floor in the WTC were destroyed. They
said they maintain complete copies at remote locations as do most
brokers. Still, you can bet that there are tens of thousands of
accounts that were not so lucky simply due to the numbers of
financial firms destroyed. What will this do to the markets?
How are these types of disasters handled in the financial community?
We will be producing a complete range of articles today and tomorrow
on how this will impact everyone. We will do our best to cover every
aspect of the financial impact to our readers.

The US markets never opened but the European markets still open
dropped from 4-7% before closing. The German DAX fell almost -9%
before a bomb threat stopped trading. US exchanges will be closed
at least through Wednesday and quite probably even longer once the
magnitude of the damage to the infrastructure is determined. There
is a precedent for this since the markets were closed two days
when Kennedy was assassinated. The US markets will not crash.
Surprised? The world economy cannot afford to let the US markets
crash. Even though the confidence in the strength of the US has
been broken the world banks and governments have all come out in
support of the US. They have pledged to inject whatever liquidity
needed to insure that all market needs are met. There is a very
good chance that the Fed will make an intermeeting rate cut the
day the market reopens to show support and prop up the markets.

Historically the markets will dip on major event but quickly
rebound as bargain hunters rush in to fill the gap. Did JNJ
change its product line? Did Cisco announce it was getting out
of the router business? Of course not. This is a news event
that will rock the markets but the basic economy has not changed.
It still stinks but it is still the best economy in the world. In
reality the fall out from this event could actually provide a
jump start once the initial shock has passed. There are going
to be major problems in several sectors, banking, brokerage
and insurance, see our special report for the details, and major
gains in sectors that will benefit from the reaction to this event.
Defense is the number one area which is likely to receive hundreds
of billions of dollars in windfall contracts and projects. New
security devices and new technology will be called on to prevent
recurrences in the future. Hundreds of thousands of new security
personnel will be hired, trained, equipped and put to work over the
next year. Out of every catastrophe rises a stronger country.

The different security agencies are now saying there is better
than a 90% chance that Osama bin Laden was responsible for the
highly coordinated attack. There have been several warnings of
prior attacks that never appeared for reasons unknown. He has
declared war on the US in the past and has been traced to numerous
prior attacks. He has eluded attempts to catch him for years.
The last time he bombed US embassies the US tossed a couple
cruise missiles at his headquarters and called it even. I doubt
that will be the result this time. Regardless of who actually
did this he will likely become the highly visible target. There
will not be a rock big enough to hide under or a cave deep enough
to protect him. George Bush is facing a test that has no precedent.
He now has a blank check and a clear directive to silence open
terrorism on a global scale. The US and its allies will declare
war on terrorism and it will probably be a scorched earth policy.

The biggest problem for the markets next week will be the consumer.
Historically terrorist attacks cause people to stay home, restrict
spending and worry about the future. The keyword here is consumer
confidence and it took a serious hit on Tuesday. The government
will be working to put forth a strong face with a kick butt attitude
and the Fed will move into aggressive mode with Fedspeak on every
news outlet that will attempt to soothe fears. The panic buying
across the country today will ease. OPEC said they will keep the
oil markets stable. The stock market will go back to business as
usual at least by next week. It has to happen. The longer markets
are closed the more uneasy investors will become. As morbid as
it may be the markets must reopen immediately to relieve the
pressure even before they recover the bodies.

What an event like this brings into focus is our mortality and
the quickness of unexpected death. Each day we get up
and go to work without ever considering the possibility that
something outside our control could end our life and leave our
families in shock. This was brought home to me especially in
this event. I was in Washington DC on Monday for business. I
drove by the Pentagon. I flew a United 757 out of Dulles at
10:PM last night. I came very close to changing that flight
to a Tuesday morning flight to do some sightseeing. In the
lottery of life my number did not come up. My flight was
uneventful and I completed a book I had been reading. Hundreds
of travelers today were not that lucky. Their families and the
families of the office workers now number in the tens of thousands
that have been horribly changed.

We lost many subscribers today. How many we will not know for
weeks but 183 readers have email addresses that can be traced to
the WTC in a very quick search. To the families of these readers
our prayers go out that your loved one was in the group that was
able to escape. To those families whose loved ones lives were
senselessly ended our prayers are with you. No amount of good
words or well meaning intentions will help you today. Just like
the Oklahoma bombing there is no way to apply reason or rational
thought to those who did this. It will never make sense and it
will never quit hurting. God bless you and keep you.

With my deepest sympathy,

Jim Brown
Editor


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****************
MARKET SENTIMENT
****************

Global Shock

Today's terrorist attacks in New York and Washington have sent
shockwaves around the globe, and reeked havoc on international
stock markets.

Appalled traders unconsciously sold stocks, but it was heartening
to hear statements like, "We are seeing clients phone in to void
bets as they do not want to make money out of this tragedy."

The London Stock Exchange evacuated its headquarters, but
contingency plans allowed trading to continue.  The FTSE 100
closed down 5.72%, the biggest drop since October of 1987.

The German DAX suffered its biggest one-day drop, losing 8.56%,
but was down 11.6% at one point during the day.  A bomb threat at
the Deutsche Boerse shut down late-trading on the DAX Index.

The Paris Stock Exchange tumbled 7.4%.

Panic buying pushed oil and gold prices higher.  Brent Sea Crude
rose $3.60 to $31.05 before trading was suspended and price fell
back to $29.06.

OPEC said it would do everything it could to maintain stability.

Investors flocked to the safety of Gold, and the yellow metal
closed up $15.50 to $287.00 at the London Metal Exchange.

The U.S. Dollar fell sharply against the yen and euro.

Trading is halted in United States tomorrow, but overseas markets
will continue to trade.  How those stocks react should give some
indication of how U.S. stocks will open later this week.  After a
day like today, that seems pretty inconsequential.


**************
SPECIAL REPORT
**************

How your brokerage account is insured
by Jeff Bailey

Many investors and traders may be trying to get information on
how their brokerage accounts are insured and what type of
protection they may have.  Investors are never insured against
stock price fluctuation, but their accounts are insured against
a firm's inability to continue business.

We do not believe that brokerage firms would become insolvent or
that traders/investors will have to revert to the insurance that
is offered through their brokerage firms.  However, recent events
in New York have some subscribers wondering just what type of
insurance their brokerage accounts carry.  Here are the basics of
how your brokerage account is protected under the Securities
Investor Protection Corporation (SIPC).

Securities Investor Protection Corporation (SIPC) is the first
line of defense in the event of a brokerage firm failure.  Should
a brokerage firm close due to bankruptcy, financial difficulty,
or inability to continue day-to-day operations, the SIPC steps in
as quickly as possible and within certain limits ($500,000),
works to return to you cash (up to $100,000), stocks and other
securities (up to $400,000) you had held at the firm.  SIPC is a
reason that many investors no longer wish to hold their
securities in kind at a safe deposit.

Many brokerage firms purchase additional insurance on their own
to better protect their customers.  Let's face it.  There are
individuals and corporations that may hold millions if not
billions of dollars in stock or bond investments.  In my
conversation with a Charles Schwab associate, their brokerage
firm has purchased additional insurance through Travelers
Insurance to further protect their brokerage customer's accounts
at values well in excess of the $500,000 SIPC limit.  Every
investor can call the financial institution where they currently
keep their investments to find out how much insurance their
brokerage firm carries.

SIPC is not the Federal Deposit Insurance Corporation (FDIC).
SIPC does not offer to investors the same blanket protection that
the FDIC provides bank depositors.

Should a member bank fail, the FDIC insures all deposits at the
failed institution against loss up to a certain dollar amount.
Most "savers" put their money in FDIC-insured bank accounts
because they can't afford to lose their money.

That's exactly the opposite of how an "investor" behaves in the
stock market, in which rewards are potentially greater by taking
on more risk.  SIPC does not bail out investors against declining
values of stocks, bonds or other securities that they hold in
their brokerage accounts.  Instead, SIPC replaces "missing"
stocks and other securities where it is possible to do so.

SIPC does not cover individuals who are sold worthless stocks and
other securities.  SIPC helps individuals whose money, stocks and
other securities are stolen or put at risk when a brokerage firm
fails.

Subscribers that would like further information regarding the
SIPC can visit http://216.181.142.217/sipc/index.html

Storage of Records

Most brokerage firms keep duplicate records of all clients'
transactions/statements dating back seven years.  These records
are often times kept at multiple offsite storage locations,
sometimes in different parts of the country, in paper or digital
form.  In my conversation with Charles Schwab, I was informed
that they keep records dating back 10 years.  Again, you should
be able to contact your financial institution and inquire about
their data storage and record keeping policies.

The above information is provided not to panic or uncertainty
among our subscribers.  We want subscribers to know some of the
basics that are involved in how their brokerage accounts are
insured.  In essence, an investor/trader does not need to panic
and sell underlying securities because they feel that their
brokerage firm may be adversely affected by world events.  Your
buy/sell decisions should only be based on your perception of the
underlying security itself, not the brokerage firm that holds
those securities.


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PICKS WE DROPPED
****************

When we drop a pick it doesn't mean we are recommending a sell
on that play. Many dropped picks go on to be very profitable.
We drop a pick because something happened to change its
profile. News, price, direction, etc. We drop it because we
don't want anyone else starting a new play at that time.
We have hundreds of new readers with each issue who are
unfamiliar with the previous history for that pick and we
want them to look at any current pick as a valid play.


CALLS:
*****
No Dropped Calls for Tuesday


PUTS:
*****
No Dropped Puts for Tuesday


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**********

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**************************************************************
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The Option Investor Newsletter                  Tuesday 09-11-2001
Copyright 2001, All rights reserved.                        2 of 2
Redistribution in any form strictly prohibited.

To view this email newsletter in HTML format with embedded
charts and graphs, click here:
http://www.OptionInvestor.com/htmlemail/2992_2.asp


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Trading Options aren't easy.  We know.  That's why, with over
20 years of trading experience, we've designed a website
specifically for options traders.  With fast executions, the
ability to place complex orders online, and option trades
starting at only $15.50, we have the tools you need to
implement your strategies.  To find out more or open an
account, visit our site at www.mrstock.com.
Click Here:
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*****************************************************************


********************
PLAY UPDATES - CALLS
********************

AMGN $64.13 +0.00 (+0.23) Biotech stocks are one of the few
sectors that may be relatively unaffected by Tuesday's disaster.
Support had been building near the $62 level, right on the
20-dma, but that will be seriously tested when trading resumes.
Look to initiate new positions on a bounce from either $62 or
even the $60 support level, but only if the buying volume is
strong and the BTK sector is rebounding.

BGEN $60.31 +0.00 (-1.68) Despite the relative immunity to
global economic events, the Biotechs are going to have their
recent strength tested when markets reopen.  Look for a solid
bounce above our $59 stop or even a rally through $62 on strong
volume before initiating new positions.  Of course, we need to
see the BTK index resisting the urge to sell off before opening
new plays.

BRCM $30.59 +0.00 (+0.82) BRCM has been stubbornly defending the
$30 support level over the past week, but that support is going
to be severely tested when trading reopens in the wake of the
Trade Center bombing.  If the bulls can hold the line near the
recent lows ($29.50) then our play will remain alive.  A bounce
above that level, if accompanied by solid volume can be used for
fresh entries, but keep those stops in place, just in case.

IMCL $53.73 +0.00 (+0.43) Right on the cusp of a breakout over
the $56 resistance level, IMCL is going to have a rough go of it
when trading resumes.  We will need to see the BTK index avoid
the compulsion to sell off and buyers show their resolve in
order for the current uptrend to continue.  Look for IMCL to
hold above the 20-dma near $50 before considering new positions.
A bounce from that level would be a good sign, but make sure to
play with caution until the markets begin to stabilize.

LH $74.17 +0.00 (-1.03) Monday's malaise saw LH give up a little
more ground, but it is still holding above the 200-dma.  That
support level is going to be seriously tested upon the
resumption of trading, and if support can hold, the bounce
could provide for good entries for the rebound.  Take new
positions only after you can see support begin to form, and
preferably when the broad markets begin to show the desire to
bounce.  And of course, keep your stops in place.

TSM $12.67 +0.00 (-0.27) The wedge that has been building over
the past 2 weeks remains intact and we are still looking for TSM
to rebound and rally through the $13 level.  With the expected
weakness when the stock market reopens, TSM could dip to the $12
level, providing for fresh entry points.  Just be cautious of
any excessive weakness -- a drop through our $11.75 stop will
have us dropping the play.


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*******************
PLAY UPDATES - PUTS
*******************

ACF $39.79 +0.00 (-0.21) With consumer credit on the decline as
of Monday, Financial firms were already under pressure.  But in
light of Tuesday's terrorist attack, Financial stocks are going
to see even heavier selling pressure when trading resumes.  The
$39 level had been providing some support over the past couple
days, but odds are that will fail in short order.  The next
likely level of support will be at $35, followed by $30.  Use a
drop through the $38.50 level for opening new positions and
tighten up your stops as the above-mentioned support levels draw
near.

AIG $74.26 +0.00 (+1.11) Despite statements from the company's
CFO on Tuesday that AIG has no direct exposure to the WTC
damage, the stock is likely to see renewed selling pressure
whenever the exchange reopens for business, due to the fact
that the bears will be leaning heavily on the Insurance sector
(IUX.X).  Buyers have been trying to defend the $73 support
level in recent days, but it now looks like the stock will be
testing the $70 or even $68 levels in the near future.  Use a
drop below $73 as your trigger to initiate new positions,
especially if selling volume remains robust.

BA $43.46 +0.00 (-1.72) The daily bad news items keep knocking
BA ever lower, and having its airplanes used in Tuesday's
terrorist bombing attack probably isn't going to help with
investor sentiment.  While that event is largely superficial,
BA looks like it is on the cusp of seeing a sharp decline in
the demand for its products.  Although there is some support
near $43, it looks like we could easily see a dip below $40,
possibly even to $35 based on the degree of negative sentiment
likely to be found in the markets when they reopen.  Consider
new positions on renewed weakness and follow the position down
with a trailed stop to keep from getting caught by a quick
bounce.

CHKP $32.99 +0.00 (+2.42) Barring some kind of a miracle, CHKP
is primed to roll over again as soon as trading resumes on the
NASDAQ.  The New York disaster on Tuesday is going to make it
rough on bulls in every sector except perhaps energy and gold.
Use any rollover in the stock near current levels as an
attractive entry point for new positions, looking for the
confirmation of strong selling volume.  Depending on the
severity of the selloff, our best entry point may come on a
drop under the $29 intraday low from last Friday.  Of course,
if CHKP bucks the trend, we could see an even better entry point
if the stock rolls over near $34, the level of our stop.

GMST $25.44 +0.00 (-0.20) The seemingly never-ending decline
in shares of GMST is likely to get another push lower when
trading resumes.  While the stock has slowed its rate of decline
in recent days, today's shock to the Financial markets is likely
to force a test of the $20 support level.  Look for a drop
through $25 to generate fresh entry positions, although a higher
odds entry may come on any rollover off the initial oversold
bounce.  Either way, follow your position down with a trailing
stop in the interest of preserving your profits.

HDI $44.18 +0.00 (+0.25) Consumer confidence is likely to take a
turn for the worse in the wake of the World Trade Center
destruction.  As a luxury item, HDI's products could see a sharp
reduction in demand.  Support at $45, also the site of the
200-dma, has now been violated, and we would look for it to
contain any attempted rallies when the markets re-open for
trading.  Target a failed intraday rally near this level or a
drop below the $43 support level for initiating new positions.
The first level of support will likely materialize $40, but
depending on the severity of the selling, HDI could easily
revisit $35 before the damage is complete.

JPM $37.26 +0.00 (+0.26) The devastation in the financial center
of the U.S. is going to hit shares of the big brokerages hard
when trading resumes on Wall Street.  While JPM has been
stabilizing near $36 in recent days, the selling that is likely
in our future should drive the stock down to test the $32.50
level.  Use a drop below $36 for initiating new positions and
follow them down with a trailing stop to preserve profits as
they accrue.

PGR $124.43 +0.00 (+3.94) Insurance stocks are likely to be one
of the favored bearish targets following the terrorist bombing
of the WTC.  PGR's lows from Friday near $120 are likely to be
tested shortly after trading resumes, and should it fail to
hold up under the bearish attack, the stock is vulnerable to the
$110 and possibly lower.  Target fresh positions on a drop under
$120 and follow any open positions lower with a trailing stop to
protect any profits that happen to accrue on the way down.

PHA $40.15 +0.00 (-0.12) The attempted rally from last week has
come to an end and PHA has dropped back to the $40 level as of
Monday's close.  With the world economy now thrown into turmoil,
it seems likely that this level and the lows near $39 will fail
as support.  That will give us a solid signal to enter new
positions as the markets try to absorb the impact of Tuesday's
terrorist disaster.  Make sure to follow your positions down
with trailed stops to preserve any accrued profits.

QCOM $50.54 +0.00 (+1.36) Wireless stocks managed to stage a bit
of a bounce on Monday, and QCOM rose to test resistance at the
ascending trendline near $52.  In the wake of the destruction in
New York on Tuesday, that level is likely to provide formidable
resistance over the near term.  Target a rollover from current
levels for fresh positions or look for a drop through $48.50 to
confirm the bears have resumed control of the trading action.

QLGC $26.78 +0.00 (+0.02) Technology stocks may be less
vulnerable to weakness in the aftermath of the destruction of
the World Trade Center, but it seems unlikely that QLGC will be
able to head up.  A rollover from current levels or a drop
through Friday's lows near $24.50 can both be used for
initiating new positions.  The downdraft could be short-lived
due to the stock's oversold condition, so we want to follow the
stock down with a trailing stop.

SEBL $19.58 +0.00 (+0.62) A single up day (Monday) is likely
to be overrun by heavy selling pressure once the markets reopen
in the aftermath of the terrorist acts on Tuesday morning.  It
is hard to predict the severity of the damage, but a drop
through $18.50 can be used for initiating new positions.  SEBL
is already very oversold, so follow the momentum play lower
with a trailing stop.

TSG $39.43 +0.00 (-1.17) Monday's quiet trading did nothing to
stem the flow of selling in shares of TSG and the stock fell
under $40 coming to rest just above mild support at $39.
Tuesday's aviation disaster is likely to create more downward
pressure on travel-related stocks and TSG could very quickly
fall to the $35-36 area when markets reopen.  Consider new
positions on a drop below Monday's low or wait for a failed
intraday rally to fade before opening new positions.

VZ $50.70 +0.00 (+1.65) Despite the strong rally seen on
Monday, the VZ bulls are going to have a hard time continuing
the trend after the disaster on Tuesday.  Target new positions
as the stock falls through Friday's low near $48.25.  A rollover
from current levels would provide a nice entry point, but
judging from the action in Telecom stocks in the European
markets on Tuesday, it is unlikely that we will be that
fortunate.


************************Advertisement*************************
Tired of waiting on trades to execute?
Does your broker offer Stop Losses on Options?

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Stop Losses based on the option price or the stock price.
Move your trading into the next millennium with PreferredTrade.

Anything else is too slow!

http://www.PreferredTrade.com/CF/Home.CFM?ID=OIN
**************************************************************


**************
SPECIAL REPORT
**************

United We Stand
By Eric Utley

However inconsequential, I would like to send my thoughts and
prayers to those impacted by Tuesday's terrible acts of terror.
My heart is heavy.

Central banks across the globe reassured the financial community
Tuesday that the system would not be allowed to fail in the wake
of the Attack on America.  The U.S Federal Reserve said that it
was open and providing ample liquidity to the financial system.

Fed Chairman Alan Greenspan and New York Fed President William
McDonough were in Basel, Switzerland, attending the Bank for
International Settlements meeting early this week.  While in
Switzerland, McDonough was quoted by Reuters, saying that the
Fed was "coping" with Tuesday's events.  Greenspan was not
available for comment.  However, sources close to the Fed were
reporting that Greenspan was in close contact with central
bank officials from an undisclosed location.  Furthermore, a
consortium of U.S. financial market regulators said they had
been in constant contact with Greenspan following the attacks.

In Greenspan's absence and in the wake of Tuesday's crises, the
financial media was reporting on the possibility of Americans,
and, indeed, the rest of the world, losing faith in financial
institutions such as banks, brokers, and insurers.  The slide
in the U.S. dollar during illiquid trade seemed to lend to
that speculation.  And, reports of long lines at automated
teller machines (ATMs) in New York City heightened those fears.

The fear is that people will lose faith in financial institutions
to the point where they demand hard cash in place of bank
deposits and other liquid assets, such as money markets.  No
bank keeps all of its assets in cash.  Therefore, no bank can
meet excessive demands for cash during times of crises, such as
these.  If a bank's cash is drained by withdrawals it runs the
risk of failing.

But, it is this American's opinion that there is little to fear
in the form of a financial meltdown.  Through the Fed's
impeccable track record during times of crises, I believe that
they will once again do the right thing.  History proves that
much:  Most recently, the Fed injected liquidity during the
Long-Term Capital meltdown in October of 1998; it did the same
thing during the stock market crash of 1987.  And it's doing the
same thing today.

In addition to its open market operations, many economists are
predicting that the Fed will aggressively cut interest rates to
fend off fears.  Prior to Tuesday's tragic events, the consensus
was for the Fed to cut rates by 25 basis points during its
regularly scheduled October meeting.  But some are suggesting that
the Fed may move as early as Wednesday.  Although the Fed has
already aggressively cut rates this year, further cuts in the wake
of Tuesday's attacks would only reinforce the faith in financial
markets.

Central banks around the globe echoed the U.S. Federal Reserve's
reassurances Tuesday.  The Bank of Japan in a press release said,
"The Bank of Japan, in order to secure smooth settlement of funds
and stability in financial markets, will do its utmost, including
providing ample liquidity."  Following its statement, it was
reported that the Bank of Japan offered some $8.36 billion, or
1 trillion yen, through bill purchases.  The European Central
Bank also reported that it would be providing plenty of liquidity.

Separately, American's kept their resolve during Tuesday's chain
of events.  Major mutual fund companies, such as Fidelity and
Vanguard, reported that call volumes were much lower than normal.
And that withdrawals were nothing more than average and routine.
Although early, I think that small sign demonstrates the resolve
of this great nation.


**************
SPECIAL REPORT
**************

A Trader's Personal Defense:
Definition of various stop orders
by Jeff Bailey

Over the past several months, investors have become very familiar
with the usefulness of trailing stops and different stop loss
orders that they can place on different trades they currently
have open in their accounts.  When the markets do open back up
for trading, the type of "stop" order you may have placed on a
trade should be understood.  There are two different types of
"stop" orders.  Subscribers may want to reassess their current
stop orders and understand their implications.  Here is a
description of the two most common stop orders.

Stop-loss Order:  An order placed with a broker to buy/sell when
a certain price is reached.  This order is designed to limit an
investor's loss on a security position.  Sometimes this order is
called a "stop market order."

Example:  Let's imagine you're holding long 100 shares of ABCD in
your account.  You bought it at $10 and yesterday the stock
closed at $10.  Currently you have a "stop-loss order" to sell
100 shares of ABCD at $9.

How this order could be filled.  Let's imagine that there is some
type of bad news that adversely affects the stock and ABCD opens
at $9.50.  You would still own the stock at this point.  Let's
imagine that the stock eventually trades $9 later in the trading
session.  If there were a standing bid for 1,000 shares to be
bought at $9, a trade at $9 would immediately trigger your stop
and your order would be activated.  At that point, your order to
sell 100 shares at $9 would be matched against a buyer and your
stock sold.  There are those occasions in a "fast market"
(extremely high volume and activity in the stock) where your
trade may actually not be matched with a buyer until a lower
price (perhaps $8.90).  Nonetheless, the STOP-LOSS ORDER is
designed to have your stock sold at $9 or lower.

The "stop-loss order" may have a downside that newer investors
aren't aware.  Let's assume the same situation occurs as outlined
above, but this time, lets imagine that some type of catastrophic
news hits the markets and shares of ABCD open for trading at $5.
Under a "stop-loss order" your stock may be sold at $5 and not
the $9 that you had thought it might be sold when you originally
placed your stop.

An investor that understands this type of trade execution may not
want to sell the stock at $5 as he/she feels the stock will
rebound to a higher price, or the investor may not be willing to
take that type of loss under current market conditions.  If this
were the case, then there are things a trader can do currently.

One thing an investor may want to do is to try and cancel their
"stop-loss order" to sell 100 shares of ABCD at $9 with their
broker, if they feel the stock may gap significantly below a
level that they were willing to sell the underlying security for.

Today (August 11, 2001), trading was halted in the U.S. and it
may be difficult to cancel any open orders with your broker, but
many brokerage firms will take an order that is labeled "request
to cancel."  Under more normal market conditions than exist today
after the attack on the World Trade Center in New York, a
cancellation order is often times taken and the order canceled
even though the markets are closed for trading.

Now, lets look at another type of "stop" order.  Under current
market conditions, this type of order may be more appropriate.
This order is called the "Stop-Limit Order."

Stop-Limit Order:  A "stop-limit order" is placed with a broker
to buy/sell at a specified price or BETTER.  This type of stop
attempts to limit the loss to a specified price, but to not sell
the stock for a price LOWER than the stop-limit.

Example:  Let's again imagine we bought 100 shares long of ABCD
at $10.  At yesterday's close ABCD traded $10.  Let's imagine
that this time we have placed a "stop-limit order" to sell 100
shares of ABCD at $9.

How this order could be filled.  Let's imagine that there is some
type of bad news that adversely affects the stock and ABCD opens
at $9.50.  You would still own the stock at this point.  Let's
imagine that the stock eventually trades $9 later in the trading
session.  If there is a standing bid for 1,000, a trade at $9
would immediately trigger your stop.  At that point, your order
to sell 100 shares at $9 would be matched against a buyer and
your stock sold.  There are those occasions in a "fast market"
where your trade may actually not be matched with a buyer at $9.
Let's assume the stock continues to fall to $5.  If you're order
did not fill at $9 as the stock traded lower, then your order
will NOT fill at $8.99 or lower.

However.... let's imagine that shares of ABCD did trade $9, your
order was not filled and the stock fell to $8.75.  At this point,
you still have a standing order to sell the shares at $9.  Should
the stock trade higher to the $9, chances are that your order
would then be filled.  There have been instances when "stop-limit
orders" will actually trade at $9 for a brief instant, triggering
your stop, and then a buyer bids $9.05.  Once the $9 level was
traded (that $9 level or lower MUST trade for your order to be
activated) your order becomes activated.  Should a buyer step in
and offer $9.05 for the stock, your stock could actually be sold
for $9.05.

Under current market conditions, we feel it is important for
subscribers to understand the differences between these two types
of "stop" orders.  They execute differently and each has its
advantages and disadvantages.  Only you the subscriber can
determine which type of "stop" order to place (if any) depending
on your tolerance for risk.


**************
SPECIAL REPORT
**************

Historical Market Reaction to Terrorist Attacks
Jon Farnlof

In the midst of the confusion and suffering of today's tragic
events, investors already made nervous about the recent bear
market are questioning how the markets may react when they
reopen.  There is no precedent for an attack so directly upon the
core of the US financial system; the headquarters of over 150
companies including major brokerages were in the World Trade
Center complex.  However from a historical perspective, in the
days and months following large scale terrorist or military
action the U.S. financial markets have proven to be resilient.

The following table contains the market reaction in the days,
week and year following significant terrorist events in our past:

December 7th, 1941: Pearl Harbor is attacked, onset of World War II
December 21, 1988:  Pan Am #103 is felled by an explosive near
                    Lockerbie, Scotland
February 26, 1993:  World Trade Center is bombed
April 19, 1995:     Murrah Federal Building in Oklahoma City is
                    destroyed

Dow Jones Industrial Average
Event       Day    Day    Day    Day      Week   Year
Date        Before of     After  After +1 Later  Later
12/07/1941   117   Closed   113   109     111    115
12/21/1988  2166   2164    2160   2168    2166   2691
02/26/199   3365   3370    3355   3400    3399   3838
04/19/1995  4127   4207    4230   4270    4300   5535

In each situation the initial reaction was negative, however the
markets rebounded in a short period of time and produced solid
gains within a year.  In fact, according to markethistory.com, in
the three weeks following 25 occurrences of US military action
since 1941, the Dow Jones Industrial Average has risen by an
average of 3-percent in 84-percent of those occurrences.

This suggests that although terrorist or military actions may exact
a terrible human toll, the longer-term market reactions are often
muted by time.  On an immediate personal level, it is likely the
first reaction of the markets when they reopen will be to the
downside.  Investors need to decide if they want to allow this
reaction to take them out of long positions, or to chance the
volatility will pass.  If history can predict the future, it may be
best to wait.


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