May 12, 2005

Dear Client,

I write this letter to answer questions many of you have been asking about the stock and bond market, your investments and what I think the future of the market will be.

For the last five years I have used mostly preferred stocks, these act like a bond in that the interest rate they pay is locked in at the initial offering and does not change until it is called or expires. When these are called it is usually at the $25.00 purchase price, therefore you would have received the income at lets say 8% for the duration of owning this preferred stock and then get your initial investment back. Like a bond these preferred stocks are interest sensitive thus when Greenspan raised interest rates as we have seen recently the value goes down, if they go down to $20.00 per share you will still get $25.00 per share when it is called.

These preferred stocks have worked very well the past five years as the Dow (common stocks) have stayed level at best. I still plan to use preferred stocks in accounts where they make since, but I am also looking to the future. I feel the next three years would be a good time to start changing accounts from preferred stocks to good common stocks that pay 4% or better dividends. Therefore as the preferreds are called I will be replacing them with these dividend paying common stocks.

It appears to me the market will stay relatively flat or at most 3% annually until 2008 when I think the stock market could possibly take a good turn upward.

If you have any questions at all please don't hesitate to call me at (209) 334-3999 or (800) 456-5629.

Sincerely

Al Locy

 Click the image to print this page.