The U.S. Conference Board's Consumer Confidence Index posted further gains in September, rising to 128.6. However, the two major components of the idex moved in opposite directions. The Present Situation Index declined to 155.5 in September, while the Expectations Index rose two points to 110.7. Consumers are presently pleased with business conditions, and see the U.S. economy continuing to gain over the next two quarters. As we see it, the U.S. economy should continue to grow but at a modest pace. In out opinion, the U.S. Fed's decision to leave interest rates unchanged will ensure that the economy will grow as the huge buildup in inventories are depleted!

EQUITIES: U.S. stocks ended the third quarter with all of the major indexes posting sharp gains, the participation of the secondary and the third level stocks helped boost market gains. The fourth quarter is here and the third quarter earnings will soon be released. As we have been saying, third quarter earnings for the most part will meet expectations. Traditionally, October is a poor month for stocks, and one could argue that the market is about to stumble. However, we believe the market may break with tradition and move to new highs. We base our view, on still strong Fundamentals and low interest rates. Long-term rates are moving lower and we believe a 6¼% yield will lure foreign investors into the U.S. stock market. A new buy recommendation is Travel Parts of America. (TPOA 4¼), with a price target of 8 over the next 1.2 months.

GOLD: A good technical rally has taken spot gold above the 335 level. We believe gold will now trade in a new trading range between 325 and 340. We look for a pullback from the 340 level back down to the 325-330 range. We see increasing demand for gold over the next few months.

BONDS: No change, we continue to look for long-term yields to move to 6¼% as the economy continues to moderate.

DOLLAR: No change!

October 1, 1997Peter Cardillo, Director of Research

Westfalia Investments, Inc.

90 West Street, New York, New York

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