American Investment Services, Inc.

Disciplined, Diversified, & Cost Effective

Sept. 2001 – Put to the Test

Shock, anger and fear; these feelings, following the events of September 11, are inescapable. This sudden reminder of our vulnerability, and the randomness of life, has been devastating. The objective of these acts was to terrorize. How we react, ultimately, will determine whether that objective has been met.

Our economic prosperity rests on consumers and investors behaving rationally to maximize their personal prosperity. We have often written that investors must focus on discipline, diversification, and cost in order to reach their financial goals. That first principal is being put to the test. Decisions based on emotions are rarely good ones, yet in the current environment, few of us can ignore our emotions.

The news of the terrorist attacks spread around the globe within minutes. When the markets resumed trading, 5 trading days after the attack, security prices were immediately impacted. The Dow Jones Industrial Average fell 7.13% the first day. As the table below demonstrates, however, there is little correlation between these sharp drops following dramatic events and market performance a year later.

We hope our readers did not undertake any immediate panic selling in anticipation of what was to come. Nor should investors sell their holdings now in order to wait for a “period of less uncertainty.” September 11 was proof that such a day will never come. Conversely, investors should not attempt to “buy low” in the wake of perceived panic selling on the part of others.

Investors who do not stay the course have no hope of arriving at their destination. We think our recommended portfolios, which include cash, bonds, and gold in higher proportion than most, will help our readers navigate the inevitable storms they will encounter along the way.

Also in This Issue:

I Bonds: A Closer Look
Tax Tips for 2001
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow-Jones Industrials Ranked by Yield