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(March 15, 2002) FINANCIAL INSTRUMENTS: INTEREST RATES--Treasury instruments rallied on Friday correcting from previous sessions heavy selling which pushed prices into a technically "oversold" condition. The long bond, which has a coupon of 6%, is still below par indicating an expectation of yields in excess of 6%. The economic data had once again been "misread" by analysts. For instance, the Federal Reserve reported industrial production rose by 0.4% for February while economists forecast a modest 0.2% increase. Other factors that should have pressured treasury prices were the University of Michigan consumer sentiment index which was reported at 95.0 in mid March from 90.7 in February and the revised January industrial production from a 0.1% decline to a 0.2% increase. As I have stated in the past, in my opinion, the "faulty" forecasting of important economic data is actually creating the irrational directional moves. Be that as it may, figures are showing slight improvement but in my opinion not enough to offset the damage done to the economy and labor front. Once again, as I have indicated in prior commentaries, unemployed consumers do not consume anything and the current so called industrial sector improvement could merely relate to the replenishing of inventories, not to new consumer demand. Stay with the bonds at this point, but caution is the watchword and stops should be used. The possibility of further positive economic data could provide the Fed with a reason to change their bias from neutral to positive as relates to rate adjustments. My feeling has been that the round of rate increases two years ago prompted the economic recession and now the lowering of rates may have had the opposite effect. Rate adjustments usually take 6-9 months to appear in the economy but Mr. Greenspan and the gang at the Fed have adjusted rates before the effect actually appeared. I continue to believe that "overkill" in either direction has been the watchword at the Fed and do not see any change in their sentiment in the offing.

John L. Caiazzo

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