June 28, 2000

Over the years weve advocated using the futures markets to make inferences about market expectations. To determine which industry groups will benefit from our economic forecast, we apply, in an ongoing process, our Selector Methodology. We attempt to select industries that are likely to outperform in the near term. Our statistical procedure attempts to estimate industry responsiveness to the economic cycle. In effect, we estimate an average response over previous cycles. Our estimates are dependent on the availability of quarterly historical data. The length and quality of that data affect the reliability of our forecasts. The shorter the horizon, the less history we have. Thus, the more volatile the earnings history, the less reliable the estimates produced by our model. Looking forward to the third quarter, our Industry Selector favors: Agricultural Products, Aluminum, Automobiles, Computers (Networking), Electronics (Semiconductors), Gaming, Insurance (Life/Health), Investment Banking/Brokerage, Oil (Integrated Intl), Publishing (Newspapers), Retail (Specialty), Services (Advertising/Marketing), Telecommunications (Cellular/Wireless), Textiles (Apparel) and Textiles (Home Furnishings).

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