October 6, 2004

To Our Clients and Friends,

THE MARKETS
The markets have traded in a narrow range all year, which is natural after the large run up last year. The Dow 10,000 has been crossed again and again and again. Nearly 20 times it has crossed the magical 10,000 mark. We all know markets go up and markets go down. Neither the bulls nor the bears seem to get much traction in this pre election environment. Investors understand there are risks, including the hard to assess terrorism factor. These days the risks most often cited are oil prices, China's over-heated economy, terrorism, and interest rates. These risks don't seem worse than we have typically observed over the years. For an interesting take on rising interest rates, read the enclosed article, "Three Cheers for Higher Rates" by Jeremy Siegel, Professor at the University of Pennsylvania's Wharton School.

HOT SUMMER NIGHTS
What is worrying stock market investors and keeping them up at night? There are certainly a number of risks noted above, but the most obvious concern is the upcoming election. Markets don't like change, so what does history say about the stock market and various election options? Ned Davis Research tell us that since 1901, the Dow gained 7.2% under Democratic presidents, and 3.6% under Republicans. Strange, yet true, the best performance has occurred under a Democratic President and a Republican Congress, a gain of 9.6%. We Americans seem to like a divided government.

REMEMBER
As usual, please feel free to call us. We are here to answer your questions, respond to your concerns, and help you make smart decisions about your money.

Very truly yours,

ZRC Financial Services, LLC
A Registered Investment Advisor

By:
         Richard P. Clarke