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Portfolio Review

HAVING TROUBLE PRINTING?
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There's Just No Reason To Buy Stocks...

Stocks finished another session of listless activity Thursday as investors pondered new data reflecting a modest slowdown in business spending and economic growth. The mixed results did little to boost the performance of the major equity averages, all of which will likely end in negative territory for the first three months of 2005. Fortunately, the same can NOT be said for the OW Portfolio, which has achieved consistent gains in spite of the bearish trend in share values. In addition, the current positions (PMTI, BCSI, SOHU and USG) are comfortably profitable as we move into the month of April.

Looking forward, many analysts think there is little chance of the broader stock indices hitting new (multi-year) highs anytime soon. Some even go so far as to say that the rally starting in early 2003 was simply a part of a very large corrective pattern. While our outlook is not quite that bearish, we certainly believe caution is required as the first quarter earning season approaches. Another concern is the recently increased volatility exhibited by the CBOE's VIX and VXN indexes. Rising volatility in conjunction with market lows is usually not a good sign and even though the condition bodes well for option premiums, it does necessarily lead to profits for traders who sell options.

With these facts in mind, we are going to pursue a very conservative approach in the coming weeks (or until the market transitions to a lateral trend). This means our focus will be on longer-term positions with lower projected gains, where the probability of a successful outcome is relatively high. Traders with a more optimistic outlook can always pursue the "supplemental" positions and "bonus" plays, which generally involve a bit more risk in return for slightly higher (potential) profits. Readers should check their E-mail inbox or the OIN website for some new plays later this week-end (and don't be surprised if you find and Easter Egg).

OW Staff

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