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Date(s) - 11/11/2004
All Day

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INVESTMENT SEMINAR

P.L.A.E. Epping Forest Yacht Club

First of all, I want to welcome everyone here and thank you for joining us tonight at our 2nd annual investment seminar here at Epping Forest. The primary purpose of this seminar is to try to bring everyone together so that we can discuss how our investments did during the past year as well as to plan ahead for 2005.

Since our last letter, dated October 25, 2004, stock prices rallied last week to celebrate the end of the presidential election campaign and·’ the blue clip’s Standard and Poor 500 Index rocketed to its highest close in the last 32 months.

Obviously, investors are happy about the election outcome, in part, because it implies that taxes on dividends and long term capital gains will remain low for the next four (4) years. Also, last Friday, The Labor Department announced the payroll job report for the month of October, which surprised many analysts with the addition of 337,000 new jobs. Many economists had forecast an employment increase of about, 175,000 new jobs. August and September employment reports were also revised higher by about 113,000 new jobs. This surge in the October report was the largest in seven months, which implies that the economic recovery in the job market maybe taking hold, even though many of them were for the hurricane season cleanup. In addition, oil prices reversed their recent trend by declining ·to below $50 per barrel, which also helped fuel the rally in stocks.

So, the overall stock market applauded President Bush’s’ re¬election by staging a powerful rally. However; as we all know, the overall stock market’s path will not be straight up. In order for this rally to last, the president will have to prove to investors that he become a more fiscally responsible chief executive.

Many economists feel that there are several important steps that Bush must take in his second term, starting with meaningful spending cuts that will substantially reduce the $400 billion-plus federal deficit. They also want his, previous tax cuts to be made permanent as well as to simplify the tax system. Investors have peen upbeat about the possibilities of lower taxes and the transfer of some Social Security money into the stock market.

As far as our investment strategy for 2005, we want to continue our disciplined’ strategy of owning high quality and well managed value companies that pay above average dividends. A recent article’ pointed out another plus for dividend-:paying companies as the Bush Administration may even try to further reduce the tax on dividends by pursuing a tax rate of zero.

All in all, I believe that the year 2005, will be good for stocks. Several critical uncertainties have been lifted from the market. Bush has been re-elected. Congress, even though unlikely’ to become a rubber stamp, should be more supportive of Bush’s proposals. The price of oil has reversed course and is beginning to decline or stabilize. The payroll job numbers are beginning to show strength in the economic recovery. Interest rates should remain relatively low by historical standards even though the Federal Reserve nudged up interest rates yesterday and is likely to be followed by another quarter-point increase at its final meeting of this year on December 14. The one quarter, point increase on Wednesday would put the prime rate at 5 percent, still well below the 9.5 percent level in early 2001 shortly before the Fed began an aggressive easing campaign to deal with the shocks of a bursting stock market bubble and the 2001 recession. .. Many economists believe the Fed will continue raising interest rates gradually to the end of 2005, given that Alan Greenspan’s, long tenure end in early 2006. All of these signs point to a solid fourth quarter as well as to 2005 for all of major stock averages.

Our overall investment strategy for 2005 should not change very much, even though we will continue to be cautious.

Thank you very much and I look forward to a prosperous and healthy year for all of us. Now, I will address any questions or comments before we go over our equity model portfolio.