Note: This information is provided by Frank Sisco, CPA, PFS in his role as a principal of Financial Management Corporation, a registered investment advisor and financial advisory firm, located at 550 Mamaroneck Avenue, Suite 103, Harrison, NY 10528, and not necessarily as a registered representative of FSC Securities Corporation, a registered broker/dealer and member of NASD and SIPC, which is owned by Sun America which is in turn owned by AIG, the very large international financial services company.

By Frank Sisco, 9/14/2001

 Note: This information is provided as a starting point to help individuals to decide whether to sell or to hold their equity-related investments that do not have principal protection. The info is a guide and must be evaluated only after detailed discussions of the individuals' particular circumstances, such as financial info (e.g. assets, income, cash flow, business or job, etc.) and other info which is perhaps even more critical (e.g. family context and relationships, risk tolerance level, emotional considerations, prior experiences with loss, etc.). After reviewing this info, individuals interested in further guidance should contact Frank Sisco, CPA, PFS at 914.381.3737 (or email - ideasmoney@aol.com, or fax at 914.698.5335) to arrange an appointment to discuss strategies tailored to their situation. This info is designed to set forth the key elements of deciding whether to sell or to hold equity securities (e.g. common stocks, mutual funds and variable annuities thereof, etc.) This info does not pertain to decisions to buy investments, except that if an individual determines it appropriate to sell unprotected equity investments then that individual might find it appropriate to buy equity investments which have principal protection and/or non-equity investments which have principal protection such as bonds, CDs or money market funds. For example, it might be wise to sell current unprotected equity positions, and reinvest a portion of the proceeds into CDs and bonds and a portion of the proceeds into certain equity investments which have guarantees that protect principal after a certain time period. In addition, this info applies mainly to a retail investor (and one who has less than "excess" wealth), who usually has limited tolerance for risk and shorter time horizons, and the info does not pertain to either institutional investors or to retail speculators or very aggressive investors.

For context, certain stock market indexes at the time of this writing (closing prices on 9/14/2001) were:

Dow Jones Industrial Average - 9,605.51

Standards and Poors 500 Composite - 1,092.54

Nasdaq Composite - 1,695.38

Russel 1000 - 575.57

Wilshire 5000 - 10,104.45

Factor	Sell	Hold
In Frank Sisco's view, most if not all of these factors, especially when considered together, indicate that a more prudent decision would be to"Sell" and not "Hold" equity investments that do not have principal protection. See above note about investing proceeds. If selling during volatile market activity, the sales should be done carefully and probably over an extended period.
Historical context	Several periods in America's past have had significantly declining stock prices (e.g. late 1800s, early 1900s, 1930s, 1960s-1970s). (Refer to graph at end of memo for more details.) Most people do not have the length of time or the emotional tenacity to survive a major long-term stock market decline (over 10 years). It can be misleading to compare the current war on terrorism with prior wars (e.g. 1990 Gulf War) because this war started with significant destruction of U.S lives and property and a failure of our defensive measures. Furthermore, the extra investment return provided by equities on average over the long-term is not worth the risk of declines in value over the nearer term, because it might be necessary to sell such investments to raise cash for expenses not currently projected.	This nation has survived many negative events in the past and the stock market (e.g. S&P 500)on average since 1925 has had an investment return of about 12% over the long-term. In fact certain periods of conflict and war has experienced rising stock prices.
Future, globally	Over the short-term (say next 7 years), it is very possible that there will be more terrorist attacks, including state-sponsored attacks, and perhaps even more horrific events, including nuclear and/or biological attacks, and other significant dislocations (e.g. communications, transportation) as the ante on both sides is upped. This potential escalation of hostilities could create significant fears among citizens in this country and throughout the world, which could have the effects of (a) severely dampening current economic activity (b) delaying the introduction of new technologies and (c) fostering a climate of protectionism and extreme defensive measures. These effects could likely lead to declining stocks prices, in general. In addition, if we take on a greater role as protector of freedoms in the world, we might also bear a portion of the costs of raising the standards of living of other countries which could lower the standards of living in our own country.	Over the long-term, it is likely that we as a nation and as a free world will survive, and perhaps be inspired and even stronger. The world could become even more united and benefit from heightened global economic activity (and in turn appreciating equity prices).
U.S. economic activity	We were already in a recession or near-recession with the real possibility of a deeper recession if (a) consumer sentiment turned negative (b) the effects of recent major layoffs dampened consumer activity (c) the burst of the technology bubble had additional and wider negative effects and (d)already-shaken (and somewhat naive) investors become more bearish, especially in view of significant recent market losses. This attack, and the possible additional attacks, could exacerbate these items, leading to worsening economic activity and lower equity prices. In addition, it is likely that these attacks (a) will cause a heavy financial toll and costly rebuilding efforts (and of alternative systems, especially financial systems due to damage in the New York financial district) (b) will cause additional costs to improve security (c) will deter many companies and investors from committing significant capital or human resources to new endeavors without first getting assurance as to security, and such assurance is unlikely in the short-term.	We have survived other calamities and the strength and perseverance of our people and institutions have made us stronger financially, leading ultimately to greater prosperity.
Major systems	It is very difficult to protect against major assaults on our communications systems (e.g. phone, computer, television, radio), power grid, water supply, transportation systems,etc. If two planes could be hi-jacked by terrorists and flown into the World Trade Towers and one could be flown into the Pentagon, it is reasonable to assume that a deliberate attack on the above-mentioned systems could be carried out. Any major damage to these systems could cause very severe economic harm.	Our major systems survived the attacks and are quite good, and those that have been destroyed are being repaired.
Price-earnings multiples	Price-earnings multiplies were already too high, especially for Nasdaq stocks even after the recent declines. The multiples are likely to decline to more realistic historic levels. Also, profits for most companies in general are likely to decline for the reasons cited above. The combined effect of decreasing multiples and decreasing profits could lead to significantly declining equity prices, which might take several years to be restored. Additionally, multiples will decline because individuals will develop (a) a shorter-term perspective for their lives, in view of the significant risks made apparent by terrorists, and this perspective will lead to a shorter-term financial perspective and (b) a reduced willingness to commit capital for extended periods or to participate in very volatile markets.	If investor sentiment stays hopeful and optimistic, price-earnings multiples could remain high. If profits remain stable, then prices will not decline significantly. In fact, the U.S. equity and bond markets might be seen as a safe haven and attract capital, if attacks occur elsewhere in the world.
Involvement of the U.S. Government and financial organizations	Markets in turmoil and seen as quite vulnerable are very difficult to monitor, predict and control. Often, reasonable measures do not cause the intended positive effects (e.g. Japan's failure to lift its Nikkei 100 after 10 years of depressed prices, U.S.'s prolonged Great Depression). In addition, our successes in arresting possible financial debacles (e.g. 1987 Stock Market Crash, recent Long-Term Capital near collapse) came so close to failure that their success is not very comforting when held to the light of more significant events which are now happening.	The U.S. Government (including its agencies such as the Federal Reserve and SEC) is strong and will be effective in monitoring and controlling risks to the financial system. Financial organizations (e.g. NY Stock Exchange, Nasdaq, Chicago Board of Trade, etc.) have good protective systems in place.
Risk of widespread panic and fear	The worst is not yet behind us. As weeks and months unfold, the possibility for heightening fear and panic might escalate, leading to a possible financial panic and dumping of stocks, dramatically reducing prices, thereby taking many years to recover. By selling unprotected equity investments and reinvesting the proceeds into protected equity investments, an investor is not necessarily contributing to negative market sentiment because of the zero net equity effect. Furthermore, an investor who feels better as a result of principal protection might act more prudently and be a better consumer, and in turn help the economy, than an investor who is in continual fear of losing principal and who reduces consuming spending.	The worst is behind us and we have proven we did not panic.