What's New?

January 24, 2003

Let's Wrestle!!
Tomorrow beginning at 9:30am you can watch some pretty amazing real-world athletic competition right here in our home town!
Our Louisville Lions Wrestling Team is hosting the Louisville Invitational event at the school and our local grapplers are super this year!
Go see what all the Fuss is about, and Support Louisville Wrestling!!

Louisville History..
Thanks to contributions from Jean Mueller, we have more historic photos that will be added to the permanent archives in the History Section of our Community Website.
Take a look at Jean's latest contribution, Click HERE: http://www.louisvillenebraska.com/history/jmimages.htm See if you can guess who the kids are in the last photo! By the way, go ahead and take the 2 Louisville History Quizzes in the History Section: Click HERE: http://louisvillenebraska.com/history/index.htm

Louisville Jaycees are On the Job!
Planning has begun in earnest for this years Louisville Daz event! That should put a warm smile and memory on even the chilliest snow-shoveling Louisvillian. By sure to contact the Jaycees and tell them you would like to get involved this year.

A Plea from Lynn Berner:
Berner Real Estate

City News
As always, the folks at the city make the minutes from recent City Council Meetings available HERE for all Louisvillians to review.

Financial Outlook an editorial from Louisville
2003 Market and Economic Letter January 9, 2003
by Louisville's own Mark Leibman

I am increasingly optimistic that the worst is over in U.S. equity markets. I think economic policy has now shifted into high gear with additional tax cuts likely and interest rates very low.
The economy is in decent shape and will, in my opinion, grow strongly this year. That said, 2002 was a tough year for equities, with the Dow down 16.8%, the S&P 500 down 23.3% and the NASDAQ down 31.5%. But I think the foundation for sustained economic growth is in place and 2003 will be a much better year.

First, it is important to note that the economy was not all that bad in 2002. Real GDP grew at an annualized rate of 3.4% over the first three quarters of the year (we do not have the data for the fourth quarter yet). That is much stronger than the first three quarters of the 1991 recovery where GDP rose only 1.8%. Employment has yet to recover, down 15,000 jobs over the first 11 months of 2002. But employment is always sluggish early in recoveries as businesses work to control costs and rebuild profits.

After the first 11 months of the 1991 recovery employment was down 253,000. In that recovery the unemployment rate continued to rise through mid 1992 hitting 7.8%. This time around the unemployment rate appears to me to be peaking at 6%. The combination of flat employment and rising GDP has yielded soaring labor productivity. Over the last four quarters, productivity growth for workers at all non-financial corporations has risen a whopping 6.6%, the fastest rate of increase since 1959. For investors rapid productivity is important because it helps control business costs and increase profits. For workers it is important because it helps stabilize employment and increase wages. For all of us it is important because rising productivity is the fuel for a higher standard of living.

Inflation has remained very well controlled. Despite high oil prices, the Consumer Price Index is up only 2.3% over the last 12 months and the Producer Price Index is up only 0.9%. The upturn in producer prices is a good thing because last year there was some concern about continued deflation and the potential impact of falling prices on corporate earnings. Gradually rising producer prices coupled with very tight cost controls and rising output should, in my opinion, allow corporate earnings to rebound significantly. The Thomson First Call analyst consensus for S&P 500 earnings in 2003 forecasts a 14% rise. That strikes me as very cautious, but analysts have turned cautious these days.

Economic policy is now, in my opinion, strongly promoting growth. For fiscal policy the Bush Administration is proposing a substantial package of additional tax cuts to stimulate the economy. The President is proposing bringing forward tax cuts previously scheduled for 2004 and 2006, ending the tax on stock dividends and other tax cuts and credits. There already is considerable debate in Congress over the details of his proposal and it will likely be modified, but I have little doubt that a sizable new round of tax cuts will be enacted this year. Monetary policy, in my opinion, has also shifted to stimulus with the November

2002 cut in the fed funds rate to 1.25%. That cut has affected interest rates at longer maturities allowing longer-term fixed mortgage interest rates to fall below 6%. Also, bank lending is growing at a healthy 6.2% rate, whereas in the 1992 recovery bank lending was still falling.

All this leads me to expect a stronger economy in 2003 with companies returning to profitability. I am looking for GDP growth in the 3% to 5% range with employment starting to rise again. I do not expect a significant rise in inflation, which may temper any tendency for substantial interest rate increases. Consumer spending and housing appear to be strong, while business spending has yet to accelerate. But I think that higher profits will help restart business capital spending.

To be sure there are risks and threats we all must face. The global war on terror is far from won and war with Iraq still appears likely. The North Korean effort to resume production of nuclear weapons is a significant threat that has yet to be addressed. However, some problems closer to home have been dealt with. It appears to me that the scandals of biased Wall Street equity research and crooked accounting practices by a number of companies has ended. Straightening out the books required substantial charges and huge write-offs in 2002 that substantially, but in my opinion only temporarily, depressed reported earnings. I think cleaning up this mess promptly rather than allowing it to fester should be a positive for financial markets going forward.

We all realize that the last three years have been very painful and frustrating. It is not possible to say with certainty that we have seen the bottom and equity prices will rise going forward. I certainly expect continued volatility as various risks buffet the market. But I do believe that in the long-term the economy and the stock market move together and that the economy is moving higher on a sustained basis. I think that it is important now more than ever before to stay with a well-diversified portfolio that takes account of your risk tolerance, but also is positioned to take advantage of an equity market recovery as it develops.

Please feel free to call me with any questions or concerns you may have.

Mark Leibman
, President
Leibman Financial Services, Inc.
Securities offered through Linsco/Private Ledger,
a registered broker dealer and investment advisor. Member NASD/SIPC
(402) 234-2337
(800) 550-6275
email mark@228main.com

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