The Option Investor Newsletter Tuesday 12-24-2002 Copyright 2002, All rights reserved. 1 of 1 Redistribution in any form strictly prohibited. In Section One: Wrap: Lump of Coal For Markets Futures Wrap: A Quiet Descend Lower Weekly Fund Screen: Best in Class: Bond Funds Weekly Fund Family Profile: Pacific Investment Management Co. (PIMCO) Swing Trader Game Plan: Setting Up Posted online for subscribers at http://www.OptionInvestor.com ************************************************************ MARKET WRAP (view in courier font for table alignment) ************************************************************ 12-24-2002 High Low Volume Adv/Dcl DJIA 8448.11 - 45.20 8491.99 8443.65 .57 bln 1441/1593 NASDAQ 1372.47 - 9.20 2382.93 1372.38 .52 bln 1345/1781 S&P 100 453.27 - 2.79 456.06 453.12 Totals 2786/3374 S&P 500 892.47 - 4.91 897.38 889.48 RUS 2000 388.12 - 1.61 389.73 387.95 DJ TRANS 2307.99 - 13.70 2321.86 2307.13 VIX 30.01 + 0.68 30.35 29.49 VXN 45.13 - 0.76 46.50 45.03 Total Vol 1,161M Total UpVol 388M Total DnVol 785M 52wk Highs 143 52wk Lows 149 TRIN 2.23 PUT/CALL 0.55 ************************************************************ Lump of Coal For Markets Santa delivered a lump of coal to the markets on Tuesday in the form of the Durable Goods Orders. He was not alone as the North Korean grinch helped steal Christmas spirit as well. Despite the negative news the Dow managed to close right on support one more time. Dow Chart – Daily Nasdaq Chart – Daily The biggest hurdle for the markets at the open was a huge drop in Durable Goods by -1.4%. Analysts had been expecting a +0.5% gain. New orders fell by -1.3%. This wiped out almost the entire increase for October and prompted worries that the weak recovery bounce was failing. Orders for computers fell by -3.7% which calls into question any future semiconductor sales numbers. Despite this very negative economic news the Dow managed to rebound off the opening lows and was showing some growing strength until the grinch showed up. Even weak retail sales numbers, which showed only +0.1% growth for the week failed to make a significant impact on traders. Most have been hearing the bad news about the holiday sales for weeks now and the bad news should already be priced into the market. However, the news is going from bad to worse. The analyst community is now beginning to claim that this is the worst year for retailers since 1991. Profits are expected to be dismal and all eyes will be on next weeks reports to see if the last minute shoppers helped pull the sector back from the brink. Adding to the negativity was the Monthly Mass Layoff report which showed an increase to -240,028 jobs lost in November from -171,088 lost in October. There were 2,150 mass layoffs announced in November, which was significantly above the 1,497 in October. The continuing rise in the rate of unemployment and the drop in durable goods bodes ill for the 4Q GDP and any early recovery in 2003. One additional indicator of overall weakness is a rash of earnings warnings from video game manufacturers. This sector is typically the last to be hit since teenage boys are the predominate buyers and are relatively loose with their money. The lack of sales across this sector should have the same impact as the earnings warnings from Lance snacks. The snack giant who depends on vending machines for a large majority of their sales warned that they would miss 4Q earnings a couple weeks ago. These extreme low-level indications of weakness are even more troubling when added to unemployment and the larger trends. The final straw for the markets was the arrival of the grinch in the form of North Korea, which warned on Friday of an "uncontrollable catastrophe" if Washington failed to back off the current hostile policy towards them. They said the confrontation between the US and NK was escalating into an extremely dangerous phase. NK has intercontinental missiles and scientists have said they could have a nuclear bomb ready for delivery in as little as three months. It appears NK is taking advantage of the worlds distraction with Iraq and using the opportunity to engage in some brinkmanship in an effort to improve their global stature. Rumsfield raised the ante on Tuesday by saying the US could fight two wars at once if pressed and could win them both. The implied threat was directed at NK and was warning them not to pull on Superman's cape. He said they could swiftly defeat NK if pressed into a second conflict. This may be wishful thinking as NK is not as weak as Iraq. The lack of positive movement in the markets during the holiday week are distressing for the bulls. This typically bullish period is slowly sinking in the quicksand of economic weakness and global events. If traders cannot pull a rabbit out of the hat on Thursday the outlook for an end of year rally will grow noticeably dimmer. The normal influx of end of year cash may be derailed into money markets instead of stocks. The markets are poised to close with losses for the third consecutive year, which has not happened since the depression. The Dow closed right on the top of current support at 8450. With only a 150 point cushion between today's close and disaster (a drop under 8300) the stage is set for the end of the year. If the bulls don't show up on schedule on Thursday we could easily see a serious trend change. I would like to wish all our readers a very happy holiday. The newsletter will operate a reduced content schedule today and Thursday with no newsletter on Wednesday. Consider giving yourself a present that lasts all year with our annual renewal bonus. You will not be disappointed! Jim Brown Editor ********************** Annual Renewal Special ********************** The annual special this year is far too large to put into an email. The highlights include two option expiration mousepads to which we have added the FOMC meeting dates this year. There are also two videos with Jim, Jeff and Buzz and seven books by leading market professionals like John Murphy. We even brought back the Trading Strategies CD from last year for all the new subscribers who have been asking for it. Click here for the full details: https://secure.sungrp.com/03renewal/ ************ FUTURES WRAP ************ A Quiet Descend Lower By John Seckinger jseckinger@OptionInvestor.com Volume was anemic on Wednesday, but bulls still failed to gain the upper hand and get a pre-Christmas rally to materialize. Tuesday, December 24th at 1:15 P.M. Contract Net Change High Low Volume YM03H 8430.00 -60.00 8504.00 8420.00 3,664 NQ03H 1024.00 -9.50 1038.50 1022.00 22,449 ES03H 891.50 -5.50 900.00 891.25 66,465 ES03H = E-mini SP500 futures YM03H = E-mini Dow $5 futures NQ03H = E-mini NDX 100 futures Note: The 03H suffix stands for 2003, March, and will change as the exchanges shift the contract month. The contract months are March, June, September, and December. The volume stats are from Q-charts. Fundamental News: Durable Goods fell a greater-than-expected 1.4% in November on Wednesday, but traders are well aware of the volatility associated with this report. Durable Goods have always been sensitive to weakness in the economy. In other news, Target reported softer year-over-year same-store sales and helped the Retail Index close lower by roughly one percent. Additionally, shares of Sun Microsystems (SUNW) advanced as a preliminary ruling stated that Java must be included in Windows. Looking ahead, Initial Claims is expected to fall from 433k to 400k during the week of December 21st (report due out every Thursday morning); moreover, November New Home Sales should fall slightly to 1 million units as set to be reported at 10:00 a.m. during trading on Friday. Technical News: Bonds rallied strongly during Tuesday’s shortened session, breaking out of a wedge pattern that began at the beginning of October. This should be bearish for stocks, and the 111’18 settlement does portend prices will test the next area of resistance at 112. A close under 110’09 should take sentiment to more neutral levels. The Semiconductor Index continues to have problems staying above the 307-308 area; losing 1.45% on Wednesday to 301.57. The high was 307.57. Shorts should temporarily cover once under 308, while the main area of resistance is higher near 320. Selling should pick up under 295. Note: The Dollar has performed a Bullish Divergence within the RSI Index on a weekly chart. If a bid in the dollar does develop, it should change the scope of the futures markets. ================================================================= The March Mini-sized Dow Contract (YM03H) Chart of Dow Jones, Daily Chart of YM03H, 120-minute YM03H Support Resistance Pivot 8398.50 8482.50 8451.25 8367.25 8535.25 Bold signifies levels based on Pivot Analysis (Globex included). The March E-mini Nasdaq 100 Contract (NQ03H) Chart of NDX, 60 Minute Chart of NQ03H, 30 Minute NQ03H Support Resistance Pivot 1018.00 1034.50 1028.25 1011.75 1044.75 Bold signifies levels based on Pivot Analysis (Globex included). The March E-mini S&P 500 Contract (ES03H) Chart of S&P 500 Index, 120-minute Chart of ES03H, 120-minute ES03H Support Resistance Pivot 889.00 897.25 894.50 886.25 902.75 Bold signifies levels based on Pivot Analysis (Globex included). Good Luck. Questions are welcomed, John Seckinger jseckinger@OptionInvestor.com ********************** Annual Renewal Special ********************** The annual special this year is far too large to put into an email. The highlights include two option expiration mousepads to which we have added the FOMC meeting dates this year. There are also two videos with Jim, Jeff and Buzz and seven books by leading market professionals like John Murphy and and Jim Rodgers. We even brought back the Trading Strategies CD from last year for all the new subscribers who have been asking for it. Click here for the full details: https://secure.sungrp.com/03renewal/#m ****************** WEEKLY FUND SCREEN ****************** Best in Class: Bond Funds These Morningstar nominees for 2002 bond fund manager of the year did an excellent job of security selection and risk management in comparison to their category peers. While investment-grade funds have produced positive returns this year, speculative-grade funds have sustained losses in 2002. As Morningstar puts it, the fixed income market has been full of "land mines" with "scores" of bond managers getting tripped up by WorldCom, Sprint, Qwest, Williams, and Conseco, to name a few of this year's corporate debt blowups. Generally speaking, the more an investment-grade fund invested in lower quality, higher yielding debt securities, the poorer it did in comparison to bond funds with little or no high yield exposure to weigh them down. According to Morningstar, the best bond fund managers were those that didn't stretch for yield and concentrate assets in a few debt securities. That was true in the municipals (tax-free) market as well. Each of Morningstar's five finalists for bond manager of the year have a different objective according to Lipper. Below is how the Lipper's system classifies the five nominees: Dodge & Cox Income (DODIX) Corporate Debt A-Rated Fidelity Spartan Intermediate Muni (FLTMX) Intermediate Muni Loomis Sayles Bond (LSBDX) Corporate Debt BBB-Rated WPG Core Bond (WPGVX) Intermediate Investment-Grade T. Rowe Price High Yield (PRHYX) High Current Yield Morningstar, meanwhile, puts the Dodge & Cox Income Fund and the WPG Core Bond Fund in the "intermediate-term" bond fund category, while Loomis Sayles Bond Fund is categorized as a "multi-sector" bond fund in Morningstar's system. Three funds, including Dodge & Cox Income, Fidelity Spartan Intermediate Municipal Income and WPG Core Bond, currently sport an average credit quality of "AA" per Morningstar, giving them "high-grade" characteristics today. By comparison, T. Rowe Price High Yield has a "B" average credit quality according to Morningstar, indicative of its "high-yield" designation. The fund did not produce as much total return this year as investment-grade funds did but its positive 3.0% percent return looks great compared to the 2.6 percent loss generated by the average high yield bond fund this year, per Morningstar. Below is a performance summary for the five Morningstar nominees through December 20, 2002. Dodge & Cox Income (DODIX): Manager: Team Managed YTD +11.3% / 1Yr +10.3% / 3Yr Avg +10.3% / 5Yr Avg +7.6% Fidelity Spartan Intermediate Municipal Income (FLTMX): Manager: Team Managed YTD +8.2% / 1Yr +8.4% / 3Yr Avg +7.6% / 5Yr Avg +5.5% Loomis Sayles Bond (LSBDX): Manager: Dan Fuss & Kathleen Gaffney YTD +12.6% / 1Yr +13.3% / 3Yr Avg +6.7% / 5Yr Avg +5.7% Weiss, Peck & Greer ("WPG") Core Bond (WPGVX): Manager: Daniel Vandivort & Sid Bakst YTD +10.2% / 1Yr +10.6% / 3Yr Avg +10.2% / 5Yr Avg +7.9% T. Rowe Price High-Yield (PRHYX): Manager: Mark Vaselkiv YTD +3.0% / 1Yr +3.5% / 3Yr Avg +2.0% / 5Yr Avg +2.9% When you look at the equity-style returns put up by Dodge & Cox, Loomis Sayles, and Weiss, Peck & Greer (WPG) this year, it would be unrealistic to assume that bond funds can continue to produce such robust returns in the future. Three years of economic down times have been rough for the equity market and U.S. dollar, but a boon for the fixed income market. People jumping on board the bond fund train today may be setting themselves up for a decline, with the fixed income rally now into extra innings. Still, you can't take away from what these portfolio managers or teams have accomplished in 2002. When a core bond fund like WPG Core Bond Fund makes more than 10 percent in total return, it is an outstanding year for shareholders. According to Morningstar, all five finalists earned returns that ranked in their relative category's top one-third in 2002. Four of them are ranked in top decile (10%) of their Morningstar bond fund category for the YTD 2002 period as follows: +11.3% Dodge & Cox Income (DODIX) 3rd percentile +12.6% Loomis Sayles Bond (LSBDX) 6th percentile + 3.0% T. Rowe Price High-Yield (PRHYX) 9th percentile +10.2% WPG Core Bond (WPGVX) 6th percentile While all of these bond fund managers are deserved of the honors, we particularly like the smooth ride provided by the Dodge & Cox bond fund management team. Not only has the management team put up a YTD total return of 11.3%, it's done so with low volatility, as evidenced by the fund's 1-year chart shown below. The above chart shows a steadily rising NAV price over the past year for the Dodge & Cox Income Fund. This is exactly what you want from a bond fund - strong, consistent total returns with a low level of volatility. For this reason, Dodge & Cox's income management team gets our vote in 2002. Dodge & Cox Income (DODIX) This $1.9 billion team-managed, intermediate-term bond fund has honed its skills through the years, focusing on "values" within the investment-grade bond market. It pursues income consistent with preservation by investing at least 80% of assets in higher quality government and corporate debt securities. Appreciation is a secondary consideration. Through the years, the Dodge & Cox management team has produced stellar returns by overweighting the corporate bond sector, but this year, the numerous credit risk "land mines" were difficult to maneuver past. Dodge & Cox's management team was one of the few bond managers to escape relatively unscathed in 2002, owing its success to the combination of many small bets. Morningstar says the fund's interest-rate and credit-risk profile is "quite tame" relative to similar funds. Rather than make big sector, security or duration bets, Dodge & Cox focused efforts in 2002 on identifying higher quality, debt securities with "undervalued" prices. Like in stock management, the lower relative prices of underlying holdings helps to limit volatility compared to similar funds. The bonds that this team buys tend to be strong credits, which are not likely to default. Contributing to this fund's strong relative performance in 2002 is its low expense ratio. At 0.45%, the fund's current expense ratio is less than half of the average intermediate, investment- grade bond fund per Morningstar. The fund's low expenses allow its management team to take fewer chances, and stay competitive. Managers with high cost hurdles may be inclined to take greater risks with portfolio assets (to overcome their higher expenses). Conclusion Unfortunately, I'm unable to tell you who the team members are because Dodge & Cox doesn't make public the names of its stock and bond team members. That's Dodge & Cox's way of saying the process matters more than the people charged with managing the assets. Proponents of team-management should like this mutual fund's conservative, team-managed approach. Since 1989, the Dodge & Cox bond management team has generated superior "risk-adjusted" returns for shareholders, focusing on quality issues that are underpriced at time of purchase. Bond investors seeking a fine core bond holding have an appropriate choice here. For more information, go to the Dodge & Cox site located at www.dodgeandcox.com. Steve Wagner Editor, Mutual Investor firstname.lastname@example.org ************************** WEEKLY FUND FAMILY PROFILE ************************** Pacific Investment Management Co. (PIMCO) Our last fund family profile of 2002 looks at the self-proclaimed authority on bonds, Pacific Investment Management Company (PIMCO) of Newport Beach, California. In the year of the bond, we wanted to recognize the two-time recipient of Morningstar's bond manager of the year award, which was absent from the list of nominees for 2002, not for lack of strong absolute and relative total returns. With more than $300 billion in assets under management, PIMCO is one of the world's leading fixed income managers, providing bond fund shareholders access to the "highest standard of excellence." Their outstanding long-term record versus indices and fund peers among all bond styles and strategies has garnered many accolades through the years. Bill Gross established PIMCO in 1971 to provide separate account management services to institutional investors, such as pensions, endowments and foundations. Today, PIMCO's clients include over half of the Fortune 100 and over 60 of the top 200 pension funds in America per company sources. They attribute their success to their "total return" approach and impressive long-term record of performance in both bull and bear markets. PIMCO is also recognized as a fixed income innovator. Gross and staff created the "total return" approach in 1975 and introduced the use of mortgage-backed securities in total return portfolios. They created a dedicated "low duration" product in 1980 and then in 1985 pioneered the use of "derivatives" in total return funds. In 1990, PIMCO introduced the use of international bonds in total return portfolios. A dedicated high-yield product was introduced in 1992. An institutional share class of the firm's flagship Total Return Fund (PTTRX) was launched in 1987, and in 1994 an administrative shares class was added. The institutional/administrative shares have a $5,000,000 minimum initial investment. In 1997, A, B and C shares were started, making the Total Return Fund available to the retail marketplace through financial advisors. In 1998, a D share class was introduced with no sales loads but higher annual operating expenses. The D shares are available on a no-load NTF basis via Schwab's OneSource program and other leading brokerage fund marketplaces, and carry a $2,500 initial minimum investment. By 1998, PIMCO had over 200 institutional clients with separate accounts, and its flagship Total Return Fund topped $20 billion in total assets to become the nation's largest bond mutual fund. Total Return assets grew by $5 billion the following year (1999) to become the largest bond mutual fund in the world, a status it has since held. Total Return Fund has $65.5 billion in combined assets today, ranking it as the second largest mutual fund after Vanguard 500 Index Fund (VFINX) which has $72.3 billion in total assets currently, per Morningstar. In the next section, we review PIMCO's mutual fund lineup, which includes a broad range of equity and fixed income strategies and styles. Fund Overview According to the PIMCO Funds website (www.pimcofunds.com), there are 67 stock and bond funds in the PIMCO fund family, although I counted 70 of them in the complete PIMCO fund listing, including 38 stock funds and 32 bond funds. PIMCO stock funds are sub-advised by leading money managers, and span the range of investment classes and styles, including value, blend and growth oriented funds, as well as enhanced index funds, global/international stock funds, and sector-related stock funds. PIMCO bond mutual funds are managed internally and incorporate a cyclical and secular overview in adding value across all sectors of the fixed income market. The flagship Total Return Fund aims to provide total return, consistent with preservation of capital, by investing at least 65% of assets in debt securities including U.S. government securities, corporate bonds and mortgage-related securities. Up to 20% of assets may be invested in fixed income securities denominated in foreign currencies. In this fund, the portfolio duration generally ranges from three to six years. The $8.7 billion PIMCO Low Duration Fund (PTLDX), PIMCO's second largest mutual fund, is also managed by Bill Gross and follows a similar approach as its Total Return Fund sibling except that it mainly invests in fixed income securities with average durations between one and three years. In both mandates, Gross utilizes a variety of fixed income tools and techniques, including interest rate anticipation, credit-risk analysis, call-risk analysis, and foreign exchange rate forecasting. The Low Duration product may invest up to 10% of assets in lower quality, higher yielding debt securities and may invest all assets in "derivative" securities. PIMCO's Real Return Bond Fund (PRRIX) is the largest fund of its kind today. This $5.9 billion intermediate-term bond fund seeks to realize maximum "real return" consistent with preservation of real capital. It normally invests at least 65% of its assets in "inflation-indexed" bonds issued by U.S. and foreign governments, and the remainder in other fixed income securities including non- U.S. dollar denominated debt. Here, the fund's average duration will vary approximately within the range of the average modified real duration of all inflation-indexed bonds issued by the U.S. Treasury, per the PIMCO website. The fund is "non-diversified." Portfolio managers (Bill Gross included) are mainly responsible for market research, portfolio strategy, and trading execution. Bill Gross oversees all investment management activities as the firm's chief investment officer. PIMCO attributes its long-term success to having a "disciplined" approach to identifying values in the market and executing trade positions. Their philosophy is to take a long-term and top-down view of the market as embodied in their 3-year to 5-year secular forecast. These top-down views are then combined with bottom-up quantitative and credit research to identify short-term cyclical trends and to identify optimal strategies for implementing their long-term views in a consistent and cost-effective manner. Another key aspect of PIMCO's investment success is tight "risk" management and controls. Portfolios are continuously monitored on the basis of individual security and total portfolio risk, as well as strategy correlations. Portfolio managers are involved in the risk management process, working with their "Engineering Group" to create portfolios that are theoretically sound, total return-driven, and reality-based. While PIMCO managers do have extensive input into the risk-management analytics, they're one of few money management firms to separate their risk monitoring function from portfolio management. This "separation of power" ensures that risk management and controls are strictly enforced. The result are some of the best return-to-risk tradeoffs in the bond fund world. In the next section, we look at PIMCO's fixed income fund ratings and performance. Since our focus this week is on PIMCO, the authority on bonds, we'll limit our discussion to the bond mutual funds, where most fund assets are held today. Fund Ratings and Performance Below is a summary of Morningstar ratings for the largest, most successful PIMCO bond funds using the institutional share class for comparison purposes. PIMCO Total Return I (PTTRX): Morningstar Risk Rating: Average Morningstar Return Rating: High Morningstar Overall Rating: 5 Stars PIMCO Low Duration I (PTLDX): Morningstar Risk Rating: Average Morningstar Return Rating: High Morningstar Overall Rating: 5 Stars PIMCO Real Return Bond I (PRRIX): Morningstar Risk Rating: Above Average Morningstar Return Rating: High Morningstar Overall Rating: 5 Stars PIMCO Short-Term I (PTSHX): Morningstar Risk Rating: Below Average Morningstar Return Rating: High Morningstar Overall Rating: 5 Stars As you can see, each of PIMCO's largest bond funds have overall ratings of 5 stars (highest) by Morningstar for "risk-adjusted" returns relative to their respective category peer group. Only one of them, though, has a below-average risk profile. For the risks incurred, long-term shareholders have been amply rewarded. Next, we show how these PIMCO bond funds have performed and are ranked in their relative Morningstar category over various time periods, using Morningstar data as of Friday, December 20, 2002. PIMCO Total Return I (PTTRX): 2002 Return (YTD): + 9.7% (10th percentile) 3-Year Avg. Return: +10.4% (5th percentile) 5-Year Avg. Return: + 8.1% (2nd percentile) PIMCO Low Duration I (PTLDX): 2002 Return (YTD): + 7.4% (13th percentile) 3-Year Avg. Return: + 7.8% (17th percentile) 5-Year Avg. Return: + 6.7% (10th percentile) PIMCO Real Return Bond I (PRRIX): 2002 Return (YTD): +15.6% (1st percentile) 3-Year Avg. Return: +12.5% (1st percentile) 5-Year Avg. Return: + 9.6% (1st percentile) PIMCO Short-Term I (PTSHX): 2002 Return (YTD): + 2.9% (26th percentile) 3-Year Avg. Return: + 5.4% (26th percentile) 5-Year Avg. Return: + 5.4% (13th percentile) You can see the superior returns delivered by John Brynjolfsson, who has managed the PIMCO Real Return Bond Fund since it started in January 1997. The nation's largest inflation-index bond fund has returned more than 15 percent for investors in 2002, and has produced a stock-style 9.6% average annual total return over the past five years to rank in the top 1% of the "intermediate-term" bond fund category per Morningstar. Gross's 8.1% average annual return for the trailing 5-year period on PIMCO Total Return Fund ranks in the top 2% of the intermediate-term bond category. His 6.7% annualized return on PIMCO Low Duration was solid enough to rank in the top 10% of the short-term bond category according to Morningstar. These PIMCO bond funds, while the largest and most successful in asset base terms, are just some of the firm's top-notch products. In fact, six PIMCO bond funds have produced double-digit returns in 2002, led by PIMCO Global Bond Fund's 19.1% total return this year. PIMCO Global Fund (PIGLX), managed by Sudi Mariappa since November 2000 is one of five PIMCO bond funds to rank in the top 5% of their respective fund category, per Morningstar. Below is a summary of PIMCO's top-performing bond funds of 2002 and their respective Morningstar category percentile rankings. +19.1% Global Bond (PIGLX) 12th percentile +17.0% Long-Term U.S. Government (PGOVX) 14th percentile +15.6% Real Return Bond (PRRIX) 1st percentile +12.8% Emerging Markets Bond (PEBIX) 21st percentile +10.8% New York Municipal (PNYAX) 4th percentile +10.6% Investment Grade Corporate Bond (PIGIX) 5th percentile + 9.7% Total Return (PTTRX) 10th percentile + 9.4% Moderate Duration (PMDRX) 14th percentile + 9.3% Total Return Mortgage (PTRIX) 2nd percentile + 8.9% GNMA (PDMIX) 5th percentile All of these funds as you can see have produced returns that are ranked in their respective category's top quartile in 2002, with five of them ranking in the top 5% of their Morningstar category. Each of them would make compelling cases for bond manager of the year in 2002. To be honest, I am surprised that at least one of the managers for PIMCO Global Bond, Long-Term U.S. Government or Real Return didn't make the list of nominees for bond manager of the year in 2002. Conclusion Morningstar does not like to give out its "Manager of the Year" awards two straight years to the same portfolio manager or team. Since Bill Gross and the PIMCO fixed income management team are two-time recipients of the honors, Morningstar may want to give this year's award to another effective fixed income manager but there's no question that PIMCO is still the top dog in the bond fund business. If I had to vote for the mutual fund company of the year, PIMCO would be among the list of nominees. With the corporate credit debacles this year, they did an excellent job of enhancing fund returns while limiting downside risk in 2002. Other successful bond managers, such as Metropolitan West, have slumped recently. WorldCom and Qwest holdings have dragged down their YTD returns to the bottom of the intermediate-term category per Morningstar. For more information on the PIMCO bond funds, visit their PIMCO Funds website at www.pimcofunds.com or log on to www.pimco.com. Steve Wagner Editor, Mutual Investor email@example.com ************************************************************** Annual Renewal Special ************************************************************** The annual special this year is far too large to put into an email. The highlights include two option expiration mousepads to which we have added the FOMC meeting dates this year. There are also two videos with Jim, Jeff and Buzz and seven books by leading market professionals like John Murphy and and Jim Rodgers. We even brought back the Trading Strategies CD from last year for all the new subscribers who have been asking for it. Click here for the full details: https://secure.sungrp.com/03renewal/#m ************************************************************** *********************** SWING TRADER GAME PLANS *********************** Setting Up After waiting for another high percentage entry point, the short- term charts are pointing to a possible post-Christmas gift. To read the rest of the Swing Trader Game Plan Click here: http://www.OptionInvestor.com/itrader/indexes/swing.asp The annual special this year is far too large to put into an email. The highlights include two option expiration mousepads to which we have added the FOMC meeting dates this year. There are also two videos with Jim, Jeff and Buzz and seven books by leading market professionals like John Murphy and and Jim Rodgers. We even brought back the Trading Strategies CD from last year for all the new subscribers who have been asking for it. 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