I A W

RAYMOND JAMES ADVISORY SERVICES
VOLUME X
SPRING 2003
IN THE A FTERMATH OF WAR WITH IRAQ
Russell assesses the impact on financial markets.
FRANK RUSSELL
SPECIAL TO ADVISORS NETWORK
W
posted some significant losses. Now the ques-
financial markets. The uncertainty of the war
situation with Iraq resulted in a market that hasn’t
tion on most investors’ minds is where will the
market go from here?
bottomed the way we thought it would. It’s been
a long time since the world economies have bot-
scape and significantly influenced financial
markets around the globe.
Russell asked several of its money managers to
tomed, and we think the war situation has held
the market hostage,” says Stanley Palmer, an
share their thoughts about the long-term impact
of the Iraq conflict and other geopolitical and
international large-cap growth manager at
Marvin & Palmer.
The decision, while controversial both at home
economic issues. While several of these managers had similar opinions, they also expressed
“For the past year, there has been a huge de-
some significant differences—underscoring the
value of maintaining a diversified investment
pression on the market, building from the 2002
State of the Union address. Now we’re seeing a
strategy.
Overcoming War Jitters
rebound, with the market up eight straight days,
and that hasn’t happened in a good long while.
However, as the market goes up, the volatility
Generally, most of the managers agreed that
anxiety toward the pending war with Iraq had
index is also going up and holding at a very
high level,” says Alec Cutler, a portfolio man-
been holding the equity markets back.
ager focused on large-cap value at Brandywine
Asset Management.
hen President George W.
Bush ordered military ac
tion to begin in Iraq, his command instantly changed the geopolitical land-
and abroad, initially buoyed the U.S. equities
markets, which had already experienced a sustained rally several days before Bush’s official declaration. However, as the conflict progressed and investors became concerned
about the potential for a
lengthy conflict,
the markets
“The conflict has had a major impact on the
A “H OW T O”
ON
IMPAC B ILLING
WAR continued on page 4
Table of Contents
SARAH WICKHAM
SENIOR ADVISORY CONSULTANT
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MPAC Billing Deadlines and Cut
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Page 2: CPP Seminar Strategies
Page 3:
Notable Digest Sites
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Portfolio Reporting
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ADVISOR’S NETWORK
M ARKET CPP
WITH
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COLLEEN HARLAN
MARKETING ASSISTANT
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ince it’s inception, the Charitable
http://www.raymondjames.com/rjfs/
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Randy Carver, an RJFS financial advi-
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sor from Ohio was recently featured in
interested in this no-cost commitment to
On Wall Street magazine for his seminar
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IMPAC Index under Tips For
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Kick off your marketing efforts with a
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seminar entitled “How to be a Charita-
fort. “Seminars are not a magic bullet.
bly Conscious Investor”. This way,
People are tired of being pitched…but
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or call x33025.
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April 2
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Focus on specifics that differentiate the
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the details of the Charitable Remainder
On the Digest you will find invaluable
Trust, Charitable Gift Fund, donor-ad-
investors can open a traditional charitable
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“I think it’s critical that the advisor ap-
July 16
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pert, become one,” said Carver.
Nowadays, impressive seminars draw
upon the use of advanced technology.
Learn the intricacies of the program by
September 3
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Convey your message with a projector
contacting Clay Curtis and Colleen
September 17
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Harlan, the marketing contacts associated
October 1
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specifically targeting your audience. Use
with the Charitable Partners Program.
a computer and projector for viewing of
You will benefit from a comprehensive
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the professionally done promotional
understanding of the program and a semi-
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video featuring celebrity spokesman,
nar with the power to amaze even in these
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John Lynch of the Tampa Bay Bucca-
skeptical times.
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PAGE 3
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PAGE 4
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DIGEST continued from page 3
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WAR continued from page 1
says.
“Uncertainty surrounding the war caused the markets to be oversold, so
when we get the war behind us, no matter how long it takes or in what
fashion we rebuild Iraq, the markets should benefit. We are reacting,
perhaps, too much to geopolitical uncertainty and not enough to good
domestic policies underlying the economy. Investors need to remember
that while political events cannot always be predicted, they tend to have
a strong short-term impact and a much weaker long-term impact,” says
Tom Press, portfolio manager for Next Century Growth Investors, a smallcap growth manager.
“The war is less of a factor than it might have been, since it is going well.
The market is already demonstrating something of a sigh of relief,” says
Jim Simmons, CFA, a senior portfolio manager and chief investment
officer focused on small-cap value stocks at ICM Asset Management,
Inc.
Going Forward: A Bull or a Bear?
“We’ve increased our weightings in areas like trucking, freight forwarding, some of the consumer groups and added some technology. We expect our position to show a good move on a short-term basis, which
would be the start of a good move that could last 12 to 18 months,” Press
predicts.
“I’m optimistic in the broadest sense. Global growth should be somewhere around 3% by the second half of the year and increasing into 2004.
In that environment, because companies have their cost base down to
such a competitive level, top-line growth will actually lead to unprecedented levels of earnings growth. Additionally, the equity risk premium
we’re seeing in stocks is at 40-year highs. So I expect, between earnings
growth and a reduction in the equity risk premium, we’ll see better markets—above the single-digit returns that the consensus seems to be expecting. I’d expect a very significant increase in market prices over the
After a prolonged equity market decline, the managers Russell interviewed
next year or year and a half,” says Ted Tyson, an international small-cap
manager at Mastholm Asset Management.
expressed varying levels of optimism, ranging from mildly enthusiastic
to genuinely bullish for the near future.
“I think this is really an interesting time as a small-cap value manager. In
“After three years of a grinding bear market, we believe world markets
the small-cap market, everything is down dramatically, which creates
opportunities. If we have minimal casualties and clear control in Iraq,
are ready to do better. And we are positioned for that to happen,” Palmer
we’ll see the small-cap market rally. Getting past the terrorist issues re-
WAR continued on page 5
ADVISOR’S NETWORK
PAGE 5
WAR Continued from page 4
main a real question, however. And we remain
concerned, and have been for a year, that the
consumer will run out steam and no one will be
able to justify further refinancing. Then we’ll
be challenged to find the drivers to go forward,
so the general market could remain challenged.
There will also be more competitive fights for
world market share and generally profitability
will be a hard thing to grow, but this does not
preclude individual companies from doing better. Overall, the U.S. is far better positioned that
most other countries. Demographically the
United States is an amazingly robust society,
with a very constructive mix of energy and experience,” Simmons says.
“In terms of geographical leadership, in 2001
and 2002, the best performing areas have been
emerging markets and the Pacific, excluding
Japan, and we think that should probably continue because both of those areas were depressed
from the Asian crisis and from the technology
bust. China’s and Russia’s impact is going to be
quite positive for the world. However, there are
more questions than usual about Europe, largely
because of the German economic situation and
some of the diplomatic questions raised by the
French regarding the Iraq conflict,” Palmer says.
Terrorism, of course, remains a significant background threat. “There is no way you can incor-
Questions for
Advisory staff?
porate a 9-11 type risk scenario into a portfolio
strategy. Instead of trying to cushion against one
particular event, you just have to assume, as a
matter of course, that this is something that we
will be dealing with for years. It’s not liver cancer, its diabetes. It’s a chronic condition, so it
will have increasingly less impact on the financial markets,” Tyson says.
“The individual investor’s memory is about two
to three years and the institutional investor’s
memory is about twice that long. So what investors remember is either painful equity markets or the good old days of the 1990s. What
we need to remember is the 1990s was the
anomaly. The world is generally a conflicted,
scary and anxious place, not the passive, benign nirvana of the 1990s. Think about the
1960s, when we had all of the negatives—threats
of nuclear annihilation, a corrupt government….
Yet, we had incredible stock market rallies,”
Cutler says.
RJAS Operational Questions
Bonnie Hill x39009
IMPAC Billing (Branches 50s & 60s)
Gabrielle Walker x33073
IMPAC Billing (40s, 70s & 80s)
Rachel Jallick x33068
IMPAC Marketing Questions
Clay Curtis x33071
Colleen Harlan x39012
Independent RIA Registration
Rachel Jallick x33068
SEI, Russell, Saratoga
Rachel Jallick x33068
Professional Partners
Operations
Sarah Wickham x33025
Benefiting from
Diversification
Professional Partners Marketing
This sampling of manager opinions emphasizes
Charitable Partners
Operations
Gabrielle Walker x33073
Living With Uncertainty
the conflicting nature of investing. Despite extensive knowledge of the financial markets, it is
While many experts expect the actual military
action to be swiftly decided in favor the United
commonplace to hear vastly different opinions
from various financial experts. At Russell, we
States—which gives rise to much of the optimism about the stock market—reaching a con-
don’t claim to know whether the war with Iraq
will be short or long, and we don’t know how
sensus about the long-term repercussions of this
war is not nearly so easily determined. For ex-
the financial markets will react.
ample, several other geopolitical events remain
outstanding, including North Korea and the on-
What we do know is that strategically diversified investing helps lessen volatility. By care-
going threat of terrorism.
fully selecting multiple managers with distinctly
different investment strategies, we help you
Short-term, the next issue is North Korea. The
U.S. will most likely enter into a direct negotia-
manage risk through diversification. Russell’s
investment solution is designed to provide
tion with North Korea. While there will be some
tension, the most likely outcome is positive,
greater consistency during all types of markets—
even highly uncertain ones.
Tyson predicts.
Copyright© Frank Russell Company 2003.
Clay Curtis x33071
Colleen Harlan x39012
Charitable Partners Marketing
Clay Curtis x33071
Colleen Harlan x39012
Department Management
Andy Butte x33014
Clay Curtis x33071
Contact Advisory at
(727) 573-3800
Send an Email to
[email protected]
Raymond James
Financial Services, Inc.
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St. Petersburg, FL 33716
PAGE 6
ADVISOR’S NETWORK
F IRST A NNUAL RJFS P ICNIC
WELCOME N EW A RRIVALS
Advisor’s Network
PLEASE HELP US IN CONGRATULATING
Clay Curtis and his wife, Lauren
on the birth of their first child
JAMES RYAN
born February 10
Bonnie Hill and her husband, Travis
on the birth of their second child,
NICOLE MACKENZIE
born February 19
Editor:
Mike Di Girolamo
Associate Editor:
Colleen Harlan
Contributors
Clay Curtis
Andy Butte
Bonnie Hill
Rachel Jallick
Sarah Wickham Gabrielle Walker