The Telmar 25 Ad Impact Index remains strong as does the DIA and the SPY, both of which are near three-year highs. Many positive fundamentals are contributing to this strength in stock prices, (see below). The Wall Street Journal Online reports that Zenith Optimedia, a unit of Publicis Groupe, is calling for 2004 global ad expenditures of about $370 billion, a 6.9% increase over 2003. This article can be read in it’s entirety by linking below:

http://online.wsj.com/article_print/0,,SB110230151692491734,00.html

The dollar has made a comeback this week against the major currencies, indicating no loss of confidence in the dollar by foreign investors. The 10-Year bond is still yielding below 4.15%, which is good for those with adjustable rate debt. Crude oil has continued its decline, which is good for drivers and all those that use energy. The freefall in crude began last week with a $7.00 drop in three days, a drop not seen since the Gulf War in 1991. This drop will take some pressure off the economy.

The stock market had been in a neutral position all week. But the week finished with a whimper as the Telmar 25 the SPY, the DIA and the major market averages dropped over 1% today, due in large part to Fed Chairman Greenspan’s remarks (see below). Among members of the Telmar 25, Reuters reports that Havas, the French advertising company, and Interpublic Group are set to announce a media buying joint venture to begin as early
as December. This announcement comes shortly after Havas failed to acquire Grey Global.

Today Federal Reserve Chairman Alan Greenspan addressed the European Banking Congress about the long-term effects of cumulative trade deficits. According to Greenspan, the potential exists that foreign countries that have been financing the U.S. budget deficit will weigh concentration risks, the risk of having one’s assets in only one basket. The conclusion by foreign investors may be to withdraw their funds from U.S. stock and bond funds, a situation that would lower the prices of both stocks and bonds, raising interest rates in the U.S. His suggests a reduction of the U.S. budget deficit would be the most effective way to prevent this from happening. Higher domestic saving would also be a positive factor to achieving these ends. Chairman Greenspan’s remarks can be read here.

Last week the Federal Reserve raised the Federal Funds rate to 2%. In addition, there are indications that further Fed increases await. Even the rate increases that have been implemented leave a very low “real” interest rate, defined as the nominal rate of interest less the rate of inflation. The accommodative policy continues to put pressure on the dollar, which has been weak against most of the major currencies. The ten-year note is still trading at 4.25%, a historically low interest rate and good news for homeowners with adjustable rate mortgages. In addition crude oil has continued to weaken, trading below $47 per barrel as inventories continue to increase. What is unclear is whether this increase in inventory is due to a slowing economy or greater production.

The rally that began after the elections has continued through the end of last week as the broad based SPY and DIA are both up nearly 2% for the week and nearly 5% since the U.S. election. Among members of the Telmar 25 Ad Impact Index, this morning the Wall Street Journal has reported that Dow Jones & Co. has agreed to pay $519 million to buy Marketwatch, the parent of CBS Marketwatch, the financial news Web site. Dow Jones will pay $18 per share. The stock was trading below $13 a few weeks ago. Viacom was a 22% minority shareholder of Marketwatch and bid for its remaining shares.

Last week the Federal Reserve raised the Federal Funds rate to 2%. In addition, there are indications that further Fed increases await. Even the rate increases that have been implemented leave a very low “real” interest rate, defined as the nominal rate of interest less the rate of inflation. The accommodative policy continues to put pressure on the dollar, which has been weak against most of the major currencies. The ten-year note is still trading at 4.25%, a historically low interest rate and good news for homeowners with adjustable rate mortgages. In addition crude oil has continued to weaken, trading below $47 per barrel as inventories continue to increase. What is unclear is whether this increase in inventory is due to a slowing economy or greater production.

Now that the U.S. elections are complete, a large fog of uncertainty has been lifted from the financial markets. The Telmar 25 as well as the SPY and the DIA have staged a rally of nearly 3% since it became apparent that there would be no change of hands at the White House during a time of war. Among members of the Telmar 25 Ad Impact Index, Publicis has reported organic revenue growth of 4.8% in the third quarter. On the other hand, Interpublic reported a loss larger than the same quarter last year though organic revenue growth increased by 1.8%. Organic growth is growth that excludes acquisitions.

Today the Labor Department reported that 337,000 jobs were created in October due in part to higher construction spending in the aftermath of the hurricanes that pummeled Florida in September. This news sent stock futures higher this morning, adding to the large gains of the last few days. On the other hand, bond futures were crushed as a robust economy can be viewed as inflationary. Welcome news may come to the gas pump as crude oil futures have dropped below $50 per barrel signaling lower gas prices. All this news plus the quick resolution of Tuesday’s Presidential election has removed much of the uncertainty that has loomed over the markets.

As CBS Marketwatch noted on Tuesday, better than expected earnings reports from two advertising holding companies led to a rally within the sector, a major portion of the Telmar 25. Omnicom Group’s earnings rose 17% for the quarter with revenue growing 14%. WPP reported a third quarter sales increase of 3.7%. In the media sector, Viacom reported a revenue increase of 4% and earnings that were 12% higher than the same quarter last year. In addition, they announced a huge $8 billion stock buyback. Stock buybacks are considered a signal to the market that a company’s stock is undervalued. Clear Channel’s revenue rose 4% despite a decline in radio advertising for the quarter.

Today the Commerce Department reported that U.S. Gross Domestic Product grew at a 3.7% rate, a rate that was lower than expected but higher than the 3.3% growth rate reported in the previous quarter. Given high oil prices that peaked at over $55 per barrel but have come back to nearly $50, this is a reasonably healthy growth rate for the economy. It certainly is not a sign of an overheating economy as bonds rose modestly on the news, with the 10-year bond yield within a couple of ticks of 4%. This is the last major economic report that will be released before the U.S. election on Tuesday.

Earnings season for the third quarter is just getting under way. As is tradition, GE is among the first companies to report earnings, stating that third-quarter earnings rose 11% and revenue increased 15% in the third quarter due to a stronger economy and new growth from acquisitions. Among ad agencies, Zenith Optimedia, a unit of Publicis, now expects ad revenue to increase 4.2% in 2005, up from a previous forecast of 3.8%, noting that despite concerns in the economy (some of which are discussed below), declining consumer confidence can stimulate ad spending.

Today the U.S. Labor Department reported that 96,000 jobs were created in September, lower than the anticipated 144,000. This obviously has political consequences, as this is the last jobs report that will be issued before the election on November 2. What is striking about this report is that any jobs have been created at all at a time when crude oil prices have vaulted past $50 per barrel and natural gas prices are also very high. These developments will affect gas prices and as the winter approaches, heating oil prices will make last winter look cheap in comparison. This morning’s terrorist attack by groups sympathetic to Al Qaeda on the hotels in the Sinai desert in Egypt is a grim reminder that there could still be an attack in the U.S. in an effort to affect the U.S. elections much like Spain was affected in March. Mostly vacationing Israelis occupied in these hotels.

Two members of the Telmar 25 are getting married. In the battle for the takeover of GREY, a member of the Telmar 25, the winning suitor is another member of the Telmar 25 Ad Impact Index: WPP who bid $1,005 per share of Grey. This now leaves Havas, another member of the Telmar 25 as a potential target of a takeover by one of the other advertising holding companies. This continues the consolidation that has taken place in the industry in the last five years.

This week the Federal Reserve raised the target on the Federal Funds rate to 1.75%. Despite this raise by the Fed, long-term interest rates have been declining. The benchmark 10-year note is hovering at 4.00%. This indicates that inflation is low and that perhaps the economy is not as robust as it should be. In fact since there is a 2% inflation rate, real interest rates (the nominal rate less the rate of inflation) is negative. Usually the real interest rate is about 2%.

As the oil prices go higher, weakness tends to set in the stock market. With hurricanes in the Gulf of Mexico, trouble in Iraq, and the ever-present threat of terrorism, the price of oil, after coming down to $42 per barrel is flirting with $50 again. This has a dampening effect on the economy. It is no coincidence that the strong economic growth of the 1990’s occurred at a time when the price of oil ranged between $10 and $25 per barrel.

The stock market has had a difficult summer. Advertising agencies within the Telmar 25 Ad Impact Index have been dragged downward along with the rest of the market. For example, Omnicom is not far from a 52 week low, dropping from over $80 per share to just over $70, despite reporting a 15% rise in quarterly income on higher advertising sales. Publicis hit a 52-week high in February of about $37 per share. It now trades at around $27. IPG peaked at around $17 per share and now is trading below $13. One exception to this widespread weakness is Grey as it has rallied on news that it is the subject of takeover speculation. That takeover fever has subsided somewhat as Publicis, mentioned as a potential buyer of Grey, has said it doesn’t wish to purchase all of Grey while Grey claims it does not wish to be sold off in small parts.

Last week, the U.S. Commerce Department reported that Gross Domestic Product grew at a 3.0% annualized rate of growth in the second quarter. This was lower than expected and lower than the 4.5% annualized growth rate in the first quarter. This news created concerns that economic growth in the U.S. is slowing down. One possible cause of this slowdown is the escalating price of crude oil, currently nearing $44 per barrel, a record. This high price has the dampening effect of a tax increase on the economy. Bonds love a slowing economy and have had a nice rally on the news.

As Wall Street comes into earnings season, the stock market has succumbed to a 2% drop over the last week due in part to a lower than expected jobs report (discussed below). In addition Yahoo reported earnings that were in line with forecasts. But in keeping with the bizarre psychology that often prevails on the Street, the market sold off Yahoo nearly 10% because they merely met Wall Street expectations and didn’t exceed its estimates. On the other hand, General Electric did surpass earnings estimates for the quarter, earning $.38 vs. the consensus of $.37 and its stock rose $.47 today or 1.5%.

Last week the Commerce Department reported that 112,000 jobs were created in June, about half of the consensus forecast. This sent a message to Wall Street that the economy is not overheating and perhaps the economic recovery is fizzling. While this was negative news for stocks, the bond market loves a slowing economy, as this is a sign that inflation is not rearing its ugly head. With 20/20 hindsight, this report helps explain why the Federal Reserve raised the target for the Federal Funds rate by only 25 basis points instead of 50 bp; the economy is not overheating and the brakes that the Fed applies to the economy in the form of higher interest rates can be tapped rather than slammed. Paradoxically despite the Fed increase, home mortgage rates have dropped nearly 20 basis points nearing 6%.

The stock market has been locked in a trading range that has prevailed through June. However several factors promise to add life to a market facing summer doldrums. Both the bond and stock markets will face significant news on Wednesday when the Federal Reserve votes on a change in interest rate policy. The consensus calls for a 25 basis point increase but a 50 basis point increase is not out of the question.

On Saturday, The New York Times reported on two prominent members of the Telmar 25: Grey Global and Interpublic Group. Grey hired Goldman Sachs and J.P. Morgan to explore a sale of all or part of the business. Grey has rallied over 20% in the last two weeks and even at it’s current price of $945 a share, is considered undervalued. At Interpublic, its Number 2 executive, Chris Coughlin resigned after one year as Chief Financial Officer. He was intensely involved in the ongoing turnaround at IPG and left for personal reasons. The market has not viewed this as an indicator of underlying negative news and in recent sessions, IPG’s stock price has been relatively calm.

In June the stock market has trended in a slightly downward direction without any conviction. Fundamentals remain solid in the economy though there is some consternation regarding geopolitical events, especially in the Middle East. Ad agencies that are members of the Telmar 25 have followed the market in general as most share prices were little changed to slightly lower over the past three weeks.

Today the Commerce Department reported that the U.S. current account deficit grew to a record $144.9 billion in the first quarter. In order to finance this deficit, foreign borrowing must increase by $1.6B per day. Failure to borrow this amount would result in a drop in the dollar and higher interest rates until enough foreign investment enters the U.S. market. In spite of this report, bonds have been strong with the yield on the 10-year bond dropping 20 basis points, hitting 4.65%, its best lowest yield in a month.

The stock market has been trending upward for the second half of May and the first week of June. Many factors are contributing to this movement including some greater stability in Iraq, solid fundamentals for business in the U.S., the perception that the economy is improving and good job growth. The ad agency holding companies were part of this moderate upturn over the last three weeks, gaining from 1% to 5%.

This week TNS Media Intelligence reported that U.S. advertising spending for the first quarter increased 9.6% compared to the same quarter last year, a higher than expected growth rate. The strongest media sectors were network television, Internet and cable television.

In other news, today the Labor Department reported that May payrolls grew by 248,000 workers while unemployment remained at 5.6%. The jobs report was also higher than expected. This news can impact interest rates as the Federal Reserve meets next week and may raise the target for interest rates by a quarter percent. There has even been good news from OPEC, agreeing to increase production of oil, which should provide some relief at the gas pump as the summer progresses. The price of the benchmark WTI crude peaked at $42 per barrel but has dropped to under $38.50, a dramatic move for only 3 days of trading.

After taking it on the chin late last week and early this week, the Telmar 25 Ad Impact Index, along with the benchmark SPY and DIA (which tracks the Standard and Poor’s 500 and Dow Jones Industrials respectively) are struggling to regain their footing. Among members of the Telmar 25, Yahoo completed the 2:1 split of its shares. Gannett approved a $500 million stock buyback. This is a signal to the market that Gannett views its shares of common stock as undervalued. Conversely if they were overvalued, the incentive would be to sell more shares to the public.

Today the Labor Department reported a 0.2 percent rise in the Consumer Price Index for April. This was lower than expected and touched off a bond rally in an oversold market. The yield on the 10-year bond dropped by 8 basis points to 4.77%. However volatile energy prices continue to rise as crude oil has topped $41 a barrel, higher than during the Persian Gulf War in 1991.

Good news is bad news or so it would seem after the release of this mornings Labor Department report showing that 288,000 jobs were created last month, a much higher than expected number and good news for an economy that has longed for job growth. However Wall Street saw this report as bad news, battering bonds, raising the yield on the 10-year bond to 4.77% with stocks quickly following bonds off the cliff. The Telmar 25 Ad Impact Index had enjoyed several up sessions in a row early in the week only to give all of that back in the last two days as did the SPY and the DIA. Among ad agencies, Interpublic Group reported a quarterly loss almost double that of the same quarter last year. This loss was due to a $70 million restructuring cost that will result in much larger cost savings in future years. Publicis reported strong organic growth of 4.4%, achieving double digit growth in the Pacific Rim and Latin America.

The market had been strong early in the week as Fed Chairman Greenspan noted that the Fed would not raise interest rates. However the information noted above shows that the economy is recovering and that it is only a matter of time before interest rates rise. Oil continues its meteoric rise nearing $40 per barrel. Unleaded gasoline has far surpassed previous records. This price action bolsters the notion that interest rates will be raised to combat any inflation that could occur down the road.

The Telmar 25 Ad Impact Index continues to journey through a turbulent market, with a nasty sell-off during the latter half of this week due in part to the fighting in Iraq. Among ad agencies, Havas reported organic revenue growth of .7%, reversing a trend of declining revenue. Also, Comcast withdrew its $54 billion bid to acquire Disney. Omnicom reported net income of $135.6 million, a rise of 17% compared to last year. Revenue grew 15.2% to $2.23 billion. However, the big excitement in the market has been the pending IPO of Google, the fast growing internet search engine used by 100 million people world wide. If completed, it would be the largest internet IPO since the tech bubble. The Wall Street Journal notes that Google could be valued at $20 billion to $30 billion.

This week, the government reported that GDP rose at a 4.2% annualized rate in the first quarter. This was lower than expected but still a strong solid growth rate. This figure also fuels speculation that the Federal Reserve will raise interest rates in the near future. It has maintained an accommodative monetary policy and is most likely inclined to raise interest rates to curb any inflationary pressure. The dollar has strengthened though interest rates have only risen marginally in the last week with the yield on the 10-year bond at 4.50% vs. 4.45% at the end of last week.

The Telmar 25 Ad Impact Index has been choppy over the last few weeks with no discernible bias. This also holds true for the benchmark SPY and DIA. Earnings have been strong during the current earnings season, though to date, the ad agencies have been neutral. One of the strong movers to the upside has been YHOO, up nearly 15% for the month on stronger earnings. GCI has held firm in the wake of the scandal at it's subsidiary, USA Today. One of its reporters, Jack Kelley was fired for inaccurate reporting and plagiarism over the last 10 years. The Managing Editor of USA Today, Hal Ritter, resigned as a result.

Today the government reported that U.S. durable goods rose 3.4% in March. This was a much higher level than anticipated and is further evidence that companies are increasing spending levels after a three-year period of frugality. Companies are spending because they see the economy growing and they are making investments that had been deferred. This is all reflected in the bond market, which has been taking it on the chin in the last month as the yield on the 10-year note, is now 4.45% compared to 3.70% a month ago. This has helped the dollar against other currencies, especially the Euro. This rise was aided and abetted by Federal Reserve Chairman Alan Greenspan as he stated before Congress that deflation is no longer a worry though inflationary pressures are under control. The bond market believes that the Fed will be forced to raise interest rates before the year is over.

April has been a roller coaster ride for the Telmar 25 Ad Impact Index, with several peaks and valleys and a finish slightly higher than at the beginning of the month. The Ad Agencies were mixed as OMC, PUB, WPPGY and HAVS are moderately lower for the month mostly maintaining those peaks in valleys, while IPG and GREY both were higher.

The combination of a strong economy and the issue of economic reports pointing to moderate inflation have re-ignited fears in the bond market that interest rates may be raised sooner than later. As a result, the dollar has staged a strong rally against the major currencies. Bond prices have continued to drop with the yield on the 10-year bond continuing to rise to the 4.35% range. On the other hand, the Federal Reserve, based on statements from several Fed governors, does not feel that inflation concerns are justified, indicating a patient bias before raising interest rates. The one exception on inflation is energy prices as the price of unleaded gasoline set an all time record high this week. Unfortunately this is reflected at the gas pumps as well.

As earnings season kicks in, the Telmar 25 Ad Impact Index is staging a nice rally of about 5% over the last two weeks, following the benchmark SPY and the DIA. Within the Telmar 25, YHOO reported stronger than expected earnings and the stock vaulted 16% on Thursday. GE reported a 8% increase in earnings compared to the same quarter last year. This was in line with expectations. CBS Marketwatch reported that Fitch Ratings "went bullish" on advertising agencies, noting that they are positioned to have their best year in a while. Singled out as beneficiaries of this bullish wave were IPG, WPPGY, PUB and OMC.

Consumer confidence appears to be on the rise as the Labor Department reported that companies appear to be increasing inventory levels in anticipation of higher sales. Today jobless claims fell to the lowest level in over 3 years and GDP may grow at its highest rate in 2 decades. The one bearish are to be is bonds as the bond market is anticipating higher interest rates. In just over a week, the yield on the ten year note has shot up nearly 40 basis points.

Though members of the Telmar 25 Ad Impact Index have been relatively quiet as earnings season approaches, the same can't be said about the equity market in general. Looking at a chart of the overall stock can make one reach for the dramamine. The Telmar 25 Ad Impact Index, the SPY and the DIA had a terrible time during the first half of March but each of the indexes have climbed back near the pre-March levels. Terrorism, the economy, Iraq, and the never-ending political circus that is staged in Washington D.C. have hit the financial markets hard though the business and economic fundamentals remain sound. Certainly, the ad agencies have not been immune to this volatility as 10% swings were common. For example, PUB started March at $34 per share, fell to 29 in the middle of the month and has since climbed back to $32; OMC began March at $80 per share, fell to 75 and is now at $82. WPPGY started March at $54 per share, dropped to $49 and is now at $53. GREY was at $697 per share at the beginning of March, dropped to $680 and is now at $695. These are all substantial moves both on the upside and the downside. As earnings season approaches, Wall Street bulls will be looking for the rally to continue.

Today, the Labor Department reported that 308,000 new jobs were created in March. This news led to a surge in the stock market and tanked the bond market. The bond market dumped because of the increasing chance that the Federal Reserve would raise interest rates. The yield on the 10-year bond jumped 23 basis points immediately on the news and finished the day yielding 4.14%, a jump of 26 basis points. The prospect of higher rates boosted the dollar against the Euro and other major currencies. However inflation is still low and even energy prices have gone down with crude oil near $34 per barrel from near $38. This will be welcome news at the gas pump.

Despite Thursday's strong rally, a result of the news that OPEC countries may forego production cuts, March has been an anemic month for the Telmar 25 Ad Impact Index, the SPY and the DIA as all are down from 3 - 5%. Among agencies making news, GREY reported a 59% increase in net income on a 9% increase in revenue for the year ending December 31, 2003 vs. 2002. YHOO has bucked the trend and is higher for the month. Today YHOO announced plans to acquire Kelkoo, a growing internet company that charges merchants for click throughs or customer referrals, for $575MM in cash.

Thursday's 4% drop in crude oil sparked the rally in the stock market. High oil and gas prices are viewed as having a dampening effect economic recovery. The drop in prices, a result of OPEC's announcement that production cuts would be curtailed, can only help in furthering economic recovery. The Euro remains a little soft, as the European Central Bank weighs economic data that indicates a slightly weak economy in Europe.

March has not been kind to the Telmar 25 Ad Impact Index, the SPY and the DIA as all are down from 4 - 5%. There had seemed to be some signs of a recovery but we're seeing a renewed downturn in each of the indices. This overall market weakness as hit ad agencies hard. PUB and IPG are both down 11% since the beginning of the month. WPPGY is down nearly 6% and OMC is down 4.5%.

Despite higher energy prices that can be a prelude to inflation, bonds continue their strength. Terrorism has cast a pall in Europe as the attacks in Madrid, combined with the election results in Spain have only made a tenuous mindset worse in Europe. In the U.S. the economic outlook remains good with the exception of job creation. Since interest rates in the U.S. should remain low, the dollar has had no reason to stage a sustainable rally.

After a very quiet performance last week, the Telmar 25 Ad Impact Index, the SPY and the DIA have all done a nosedive this week though today, they came out of their dives and headed higher. Among ad agencies PUB CEO Maurice Levy said he doesn't expect ad spending to rise more than 5% in 2004 while also reiterating his goal to achieve a 15% operating margin. GREY reported 4th Qtr net income was 54% higher due in part to a weak dollar and to higher ad spending in the U.S. IPG showed a loss of $102.5 million due solely to one-time charges of $121 million. These charges included the write down of goodwill, the sale of a business and a restructuring charge. Without these charges, the company made $20 million for the quarter.

The market has been anemic for the last couple of weeks. Thursday's terrorist attack aggravated that weakness. Bonds continued to be strong as the market perception is that economic growth is suspect and the Federal Reserve is under no pressure to raise interest rates. Interestingly in this low interest rate environment, the dollar has staged a rebound against the Euro and the British Pound as there is pressure on the European Central Bank to cut interest rates. This is more Euro weakness than dollar strength.

Though the gap has narrowed over the last week, the Telmar 25 Ad Impact Index continues to trail the SPY and the DIA. DIS continues to be in the news as 43% of its shareholders voted to remove Michael Eisner from his position as Chairman of the Board, though he still retains his CEO post for the moment. CVC reported a loss of $197.4 million vs. a profit of $529 million last year, despite higher revenues. The loss stemmed from costs associated with the launch of its Voom satellite service. John Wren, the CEO of OMC, the largest advertising agency holding company, forecast double-digit growth in both revenue and profit for this year as the economy continues to rebound and advertising spending rises. NYT announced 4th quarter profit gains 3.2% higher than last year due to higher advertising revenue. HAVS reported a loss for 2003 vs. a profit in 2002 due to two extraordinary charges: a write-down of goodwill and a restructuring charge.

This morning, the government reported that U.S. payrolls rose by 21,000 workers. This was much lower than expected as the consensus was a rise of 130,000. In a period of about 5 minutes bonds soared 1.5%, bringing the yield on the 10-year bond down 20 basis points to 3.83%. This was the biggest one-day move in the 10-year bond since 2001. This report means that the Federal Reserve has no reason to raise interest rates, as the sluggish recovery does not warrant rate increases. Conversely, the dollar was immediately crushed, dropping over a penny against the Euro and the British Pound. If U.S. interest rates remain at current levels, it is very difficult to be dollar bullish. The ECB would have to drop interest rates for the dollar to rally. One of the problems with the recovery and lack of job growth is that the so-called recession was very shallow by historical standards. In past recessions, unemployment would shoot up to 9 or 10%. In the last 3 years, unemployment peaked at about 6.4%. Economists used to consider a 6.0% unemployment rate the level where statistical full employment exists as it is assumed that some portion of people are between jobs or are relocating. The level of full employment is lower, around 4.5% - 5.0%.

During the last two-weeks, the performance of the Telmar 25 Ad Impact Index has trailed that of the SPY and the DIA, as all lost ground during this period. The Mickey Mouse saga continues as many of the large institutional shareholders of DIS intend to cast a vote of no confidence in Chairman Michael Eisner at an upcoming shareholders meeting that could force DIS's Board of Directors to make drastic changes to senior management. Among other members of the Telmar 25, WPP said they expect advertising spending to increase 3 - 4% this year. They also reported earnings; revenue was up 5% and pre-tax profit was 18% higher. Other stocks in the index were lower; YHOO and CCU were both down 6%, PUB was down 5% and OMC was down 2%. But IPG and GREY bucked the trend and were little changed.

Today, the Commerce Department reported that GDP for the 4 th quarter of 2003 was revised upward to a 4.1% annual growth rate, from 4% as previously reported. Despite the strong growth, inflation remains in check and the 10-year Treasury bond currently yields 4%. This growth makes the U.S. more attractive to foreign investors and the dollar has rallied against the Euro and the British Pound as a result. Another reason for the dollar rally is mounting pressure in Europe to lower their interest rates to keep the economic recovery from stalling. This makes Euro denominated investments less attractive to investors.

The Telmar 25 Ad Impact Index, the SPY and the DIA have all been on a roller coaster of sorts during the past two weeks with the Telmar 25 briefly attaining a 4% gain before turning back to a 2% gain. In the world of mega-mergers, DIS rejected Comcast's $54.1 billion offer. Roy Disney and Stanley Gold, former board members, said the offer is too low. Takeovers of under performing firms have several positive aspects; helping to maximize shareholder value, it provides competition to entrenched management that is not maximizing shareholder value. It would not be surprising to find a higher offer by Comcast on Monday given that they have only made one offer, and firms rarely walk away from a rejection by the board of the target company. Elsewhere in the Telmar 25, it was a relatively quiet week. One exception is GCI, reporting that pro forma operating revenues rose 4.6% in January, indicating firm gains in advertising in both television and newspapers.

Today, the Labor Department reported that consumer prices rose .5%, higher than expected. This rise was attributed to rising energy costs. When energy costs are excluded, the CPI rose .2%. This report was mildly bearish for the bond market as this increase could be an indication of future inflation. It also heightens concerns that the Federal Reserve may raise interest rates in the near future. The stock market didn't like the news either. But the dollar was higher on the news as higher interest rates bolster the greenback as it becomes more attractive to foreign investors.

The Telmar 25 Ad Impact Index has returned to the upside, gaining 1% for the latest two-week period, mildly lagging behind the benchmark SPY and DIA. In the January 30 comments, we speculated that DIS could be a possible takeover candidate. Last week, Comcast made a $54.1 billion bid in stock to acquire DIS, plus the assumption of nearly $12 billion in debt. The stock of DIS gained 15% on the news. The board of directors of DIS rejected this offer, but it remains up to the management of DIS to maximize shareholder value. Among other Telmar 25 members making news, PUB reported 5.2% organic revenue growth for the 4th quarter, better than expected. OMC reported organic revenue growth of 7.6%, an overall revenue increase of 18.3% and a 10% increase in profit. Finally HAVS trimmed its loss in organic revenue from -6.4% to -3.8%.

Last week, Federal Reserve Chairman Alan Greenspan testified before Congress to clarify the statements made in January implying the Fed could be "patient" in raising interest rates. He also predicted a healthy 5% growth rate in GDP for 2004. The principal function of the Federal Reserve is price stability. Since inflation is currently low at about 1%, there is little reason to raise interest rates at this time. Greenspan's comments allayed these fears, leading to a rally in both stocks and bonds. However the price level of gold indicates that there may be some inflation lurking over the horizon.

The Telmar 25 Ad Impact Index has paused to digest its gains of the last several months and is down 1% for the last two weeks mostly as a result of Wednesday’s Fed announcement casting doubt on the level of interest rates. CBS Marketwatch notes the increase in advertising spending and how that should continue in 2004 with the Olympics and the presidential election. This action has triggered merger and acquisition rumors within the media industry. And these rumors are not without foundation: the acquisition of the U.S. assets of Vivendi by NBC, a unit of GE, a Telmar 25 component will expand GE’s media presence. DIS is mentioned as a possible takeover candidate, albeit a very large one.

Among Telmar 25 companies reporting earnings, ARB reported a 9.5% increase in revenue and a 16.6% increase in Net Income for all of 2003 vs. 2002. For the quarter ending November 30, CWG reported a 19% increase in net income despite a 7.5% decrease in revenue. DJ, the publisher of the Wall Street Journal reports a higher profit on better advertising but notes that newspaper advertising is still lackluster. Overall revenue at DJ climbed 6%. NYT reported a 3.1% increase in net income for the quarter. MDP reported revenue increased 11% for the quarter while advertising revenue increased 9%.

Today the Commerce Department reported that 4th qtr GDP grew 4%, which was lower than expected. Given this growth rate, which ties in with the less than hardy increase in jobs, one questions the statement by the Federal Reserve leaving open the possibility of interest rate increases before the presidential election in November.

The Telmar 25 Ad Impact Index continues to add to its gains along with the broad based SPY and DIA in anticipation of a strong earnings season. This month, many companies within the index are scheduled to issue year-end financial results. In recent news, Merrill Lynch noted that OMC remains one of its top overall stock picks. Lehman Brothers ranked PUB Number 1 in new business for 2003. Many ad agency stocks within the Telmar 25 have been strong since the beginning of the year. Among these gainers are WPPGY, which has rocketed 18% since the year began, PUB has risen 12%, HAVS has climbed 9% and IPG has gained 7%. On the other hand, GREY and OMC have remained flat relatively flat.

After a brief bounce, the dollar has continued its descent against the Euro. Last week the yield on the 10-year bond briefly fell below 4.00%, highlighting the low yields that make the U.S. a less fertile ground for investment compared to other investments denominated in other currencies. Domestically, the gain in housing starts was the greatest since 1978. While interest rates are low, commodity prices are much higher especially in the energy sector as crude oil has surpassed $36 per barrel, heating oil hovers around $1.00 per gallon and natural gas remains over $6.00 per BTU. Recent cold weather in the North East, as well as perceived supply shortages, have contributed to much of this price action.