Linsco/Private Ledger
Member NASD/SIPC
9785 Towne Centre Drive
San Diego, CA 92121-1968
One Beacon Street, 22nd Floor
Boston, MA 02108-3106
November 14,2007
Dear Valued Investor:
Well,despite all the doom and gloom out there in the media,the economy keeps on ticking. The headlines are
screaming about subprime mortgage loan problems, but the macroeconomic data continues to improve. Last
week we got a trade report showing very strong net exports for August and September. These data,along with
stronger inventories,point to an upward revision to third quarter GDP growth from 3.9% to about 5%. And the
fourth quarter is off to a decent start. Today's report on retail sales for October shows a rise of 0.2% following
a very strong 0.7% gain in September. Retail sales are up 5.1% over the last 12 months; a pretty decent
performance,given the housing woes and high energy prices.
Inflation fears continue to look unjustified. Today's Producer Price Index (PPI) report for October,shows a tiny
0.06% increase in the total PPI and no increase in the core (ex food and energy) PPI for October. I expect some
bigger increases in the total inflation rates due to the recent renewed surge in oil prices,but the core inflation
rates look under control. Some of you have asked – why look at core inflation,when we all use energy and eat
food? My answer is that core inflation gives useful information about the short-term trend in inflation and helps
the Federal Reserve in setting interest rates. I would not want OPEC oil price gouging or Midwest droughts to
push around short-term U.S. monetary policy. Total inflation is helpful in gauging the short-term impact of
higher prices on consumer income and spending and long-term inflation trends.Right now,both measures are
fairly close – the total Consumer Price Index (CPI) inflation rate is 2.8%, and the core CPI rate is 2.1%. Again,
the recent oil price rise will likely push total CPI inflation up again,but not a lot.
Speaking of oil,our "friends"who run the OPEC oil cartel,colluding with impunity to set oil prices,are meeting
again over the weekend in Riyadh,Saudi Arabia. I think they are worried. We are seeing a rise in non-OPEC oil
supply,surging alternative energy supplies,and some signs that global demand is flattening and may be falling.
The last thing OPEC wants is a major increase in competitive energy sources and a sustained shift to
conservation. They may decide that it is time to push prices back down again to head off the competition. On
the other hand,it could be just wishful thinking;I certainly am tired of paying sky-high prices for gasoline and
other oil-based products.
The U.S.equity market is once again showing signs of life. After a fall back to near the mid-August low,the Dow
and other broad equity indexes recovered sharply yesterday. The Dow was up 2.5%,the S&P 500 was up 2.9%,
and the NASDAQ was up 3.5%. While short-term stock market forecasting is usually silly, I think the recovery
is justified by strong economic and company earnings fundamentals and therefore a rebound is more likely
than not.As always,please call your financial advisor with questions or concerns.
Sincerely,
Lincoln Anderson
Managing Director,Chief Investment Officer
The opinions voiced in this material are for general information only and are not intended to provide specific
advice or recommendations for any individual.To determine which investment(s) may be appropriate for
you, consult your financial advisor prior to investing. All performance referenced is historical and is no
guarantee of future results.All indices are unmanaged and cannot be invested into directly.
