Dow Jones 10554.29 -80.09 9:43 am PST, August 16, 2005  NASDAQ 2148.87 -18.17 For info, visit access.smallcapnetwork.com S & P 500 1225.41 -8.46 Change your subscription status here Russell 2000 657.09 -8.55 VOLUME 05: ISSUE 62  Feature: Stocks or Fixed Income - Ratio Still Bullish. Xtreme Revenue. Before we discuss whether it's better to currently own stocks or fixed income, a brief recap of what you may have missed on the SCBLOG. Over the last two weeks, we've suggested taking partial profits in Eden Energy (OTCBB: EDNE) as the shares moved through $9. Then, as the shares subsequently moved lower, we suggested a repurchase at $5 and change. We originally alerted the readership to Eden at $2.80 in late April. Eden shares are now flirting with $7.  We also updated our thinking and strategy on Bottomline Technologies (NASDAQ: EPAY), Informatica (NASDAQ: INFA), Novelos (OTCBB: NVLT) and Spectrum (OTCBB: SPSC).  Investors really do need to keep an eye on the SCBLOG, whether through the simple RSS feed or by just adding it (and the SmallCap Digest) onto your MyYahoo page--the dead-easy links are found on both the SCBLOG and SmallCap Digest pages. Daily visits are rising fast and it is quickly becoming an extremely useful tool for investors who wish to keep up with those material ''between newsletter' happenings. Stocks? Bonds? What's your guess? There are a several different ways of calculating the market's position using the S&P Earnings yield and a fixed income yield. The resultant number gives a decent snapshot of whether stocks or fixed income are more constructive/profitable, given that return. Over the years, I've heard Money Managers continually quote the figure, so I thought it would be useful to bring you into the fold. For purposes of this discussion, we'll use the S&P 500 Earnings Yield and the current risk-free 3-month T-Bill rate.  Very simply, when the current T-Bill yield is divided by the S&P Earnings Yield, the resultant number denotes the whether stocks or fixed income will tend to do better in the future. A number above 1.1 tends to favor fixed income, as stocks appear more vulnerable to correction, while anything under 0.9 favors stocks. The ratio is currently around 0.59. Here's the chart: S&P 500 earnings for 2005 are projected to be around $75.50. If we divide that number by the cash S&P 500 value of around 1230 we get an earnings yield of about 6 percent. If we divide that number into the current three-month T-Bill yield at around 3.5 percent, the resultant number is .59, or well below the 0.9 threshold level for considering a switch from equities to fixed income. If one looks at the chart, particularly when the ratio exceeded 2.0 in 2000, the resultant coming correction was fairly apparent. The Fed Funds Rate was also 6.5 percent in May 2000, so a bond buy then obviously made sense over stocks. The S&P 500 index headed down until late 2002 into early 2003 when the ratio moved back into bullish territory and signaled a turn for stocks. Very simply, the ratio shows that when the S&P 500 earnings yield is markedly higher than the fixed income yield, investors tend to decide to assume the risk of stocks versus fixed income for superior returns. When the ratio was at 2.0, T-Bill's or bonds obviously made more sense than stocks. As the ratio dropped below1.0, picking away at favored stocks and sectors made more sense. For 2006, the S&P 500 earnings projection is $82.97. No one doubts that rates will go up and take fixed income yields higher. I suspect that this ratio will continue to be constructive for stocks. As an exercise, if we do the calculation using the current S&P level, 2006 projected earnings and say a 4.00 T-Bill rate, we come up with a ratio of .58--still a decent rate for the owning stocks' case. It's a simple calculation that can tell investors much about the current and future state and direction of the markets. This indicator, while not the Holy Grail, is an indicative snapshot of the relationship and risk profile of owning stocks over fixed income or vice-versa over time. Thought you'd like to know...     MARKETNOTES: Xtreme Revenue. Xtreme (OTCBB: XTME) reported great revenues this am--$552,300 for the second quarter versus $16,800 for the same quarter 2004. We've profiled this unique and fast growing company for a while now and suggest that risk-oriented investors get on board this specialty boat manufacturer as 2005-2006 looks to be an excellent growth period for shareholders. With the shares trading around 15-18 cents and a market cap of $2.75 million, this share price likely won't last for long. The Company is appearing on more radar screens as evidenced by increasing trade volumes, so a position in the spec end of the portfolio, we believe, should yield a good return over the next 6-12 months. (Release below).     Press Release Source: Xtreme Companies, Inc. Xtreme Posts Record 2nd Quarter Revenue Tuesday August 16, 10:04 am ET WASHINGTON, Mo., Aug. 16 /PRNewswire-FirstCall/ -- Xtreme Companies, Inc. (OTC Bulletin Board: XTME - News) manufacturer of mission-specific Fire-Rescue and Patrol boats and the exclusive marketer and distributor of the 'Challenger Offshore' line of boats, announced today that it posted record revenue of $552,300 for the quarter ended June 30, 2005 vs. $16,801 for the quarter ended June 30, 2004. The loss per share also decreased to (.03) per share for the quarter ended June 30, 2005 vs. (.06) per share for the quarter ended June 30, 2004. The Company's complete financial results are available on its Form 10-QSB for the period ended June 30, 2005. Xtreme CEO Kevin Ryan stated, "We are extremely pleased to announce these record results. It is clear our business model, which had taken some time to roll out is beginning to pay big dividends. This past quarter we started to gain traction with Fire & Rescue boat sales through Homeland Security grants and increased our efficiency in marketing, sales and production of the Challenger Offshore line. We also added a top tier financial professional as our CFO to assist us in managing what I believe will continue to be a significant period of growth for Xtreme." About Xtreme Companies, Inc. Xtreme Companies, Inc. is engaged in manufacturing and marketing of mission-specific Fire-Rescue and Patrol boats used in emergency, surveillance and defense deployments. The boats have been marketed and sold directly to fire and police departments, the U.S. Military and coastal port authorities throughout the United States. Additionally, Xtreme is the exclusive marketer and distributor for Marine Holdings, Inc. (MHI) d/b/a Challenger Offshore which manufactures semi-custom fiberglass boats of 19' to 97' in length, which include leisure, performance, fishing and motor yachts. MHI is best known for their products that compete directly with the industry's largest boat producers. Internationally known race driver and designer Don Aronow, credited as being the architect of the performance boat industry, designed and created some of the hull technologies today used by Challenger Offshore. Mr. Aronow has also been credited with creating companies such as Cigarette, Donzi, Formula, Apache and Magnum. Xtreme holds an option to purchase 100% of the outstanding shares of MHI by March 2006. For more information you may visit please visit www.xtremecos.com and www.challengeroffshore.com. Xtreme's public financial information and filings can be viewed at www.sec.gov. Forward-Looking Statements This release contains forward-looking statements, including, without limitation, statements concerning our business and possible or assumed future results of operations. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons including: our ability to continue as a going concern, adverse economic changes affecting markets we serve; competition in our markets and industry segments; our timing and the profitability of entering new markets; greater than expected costs, customer acceptance of our products or difficulties related to our integration of the businesses we may acquire; and other risks and uncertainties as may be detailed from time to time in our public announcements and SEC filings. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and our future results, levels of activity, performance or achievements may not meet these expectations. We do not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in our expectations, except as required by law.   Contact:  Michael Novielli Chairman, Xtreme Companies, Inc. ph  (845)575-6770 mnovielli@xtremecos.com   Source: Xtreme Companies, Inc.     We Value Your Feedback Got comments, questions or suggestions? Send 'em on over: Editor@smallcapnetwork.com If you wish to send a written request or inquiry, please send it to our physical address: TGR Group, LLC 3525 Del Mar Heights Rd #334 San Diego, CA 92130 Subscribe Information is power and timely information is profitable. Become informed and profit from SmallCapDigest Profiles and Trading Alerts by becoming a Preferred Member today. There is no cost associated with your email subscription. Add your email address below and make sure to check your email inbox and confirm your opt-in request to start receiving the SmallCapDigest Email Newsletter on a regular basis. To ensure newsletter delivery, you can add any additional email addresses you may have to the SmallCapDigest Member List. Receiving the SmallCapDigest Newsletter in multiple locations is the best way of making sure you don't miss the next investing or trading opportunity! For web based email addresses, the SmallCapDigest recommends @yahoo.com or @aol.com for timely and reliable email newsletter delivery. Subscribe Here Note: Your email address will be kept strictly confidential, and will not be shared with any other entity for any purpose at any time. If you no longer wish to receive the SmallCapDigest, simply follow the instructions located at the bottom of every SmallCapDigest Newsletter Edition. Unsubscribe Here D I S C L A I M E R: The SmallCap Digest is an independent electronic publication committed to providing our readers with factual information on selected  publicly traded companies. SmallCap Digest is not a licensed investment professional or broker-dealer. All companies are chosen on the basis of certain financial analysis and other pertinent criteria with a view toward  maximizing the upside potential for investors while minimizing the downside risk, whenever possible.  Moreover, as detailed below, this publication accepts compensation from third party consultants and/or companies which it features for the publication and circulation of the SmallCap Digest or representation on SmallCapNetwork.net.  Likewise, this newsletter is owned by TGR Group, LLC.  To the degrees enumerated herein,  this newsletter should not be regarded as an independent publication. Visit Here to view our compensation on every company we have ever covered, or visit the following web address:  http://access.smallcapnetwork.com/compensation_disclosure.html for our full compensation disclosure and http://access.smallcapnetwork.com/short_term_alerts.html for Trading Alerts compensation and disclosure. TGR Group LLC has been paid a fee of $25,000 cash and 500,000 shares of newly issued restricted stock directly by Xtreme Companies for coverage. Additionally, Some of the companies featured in the SmallCap Digest Newsletter pay an ESP (Electronic Service Provider) fee to an affiliated Technology Company for electronic delivery of this newsletter and other web related technology services. Fees range from $3,000 to $5,000 per month. All statements and expressions are the sole  opinions of the editors and are subject to change without notice. A profile, description, or other mention of a company in the newsletter is neither an offer nor solicitation to buy or sell any securities  mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. From time to time TGR Group LLC sells shares in the open market it receives as compensation for coverage of client companies. Since the shares are received as compensation for services as previously disclosed, and not for investment purposes, the editors do not view the sale of the shares as contradictory to any advice delivered in the content. This should be viewed as a conflict of interest by shareholders or prospective shareholders of the client companies. The editor, members of the editor's family, and/or entities with  which the editor is affiliated aside from TGR Group LLC itself, are forbidden by company policy to own, buy, sell or otherwise trade stock for their own benefit in the companies who appear in the publication unless specifically disclosed in the newsletter. The profiles, critiques, and other editorial content of the SmallCap Digest and SmallCapNetwork.net may contain statements that appear forward as it relates to the expected capabilities of the companies mentioned herein. THE READER SHOULD VERIFY ALL CLAIMS AND DO THEIR OWN DUE DILIGENCE BEFORE INVESTING IN ANY SECURITIES MENTIONED. INVESTING IN  SECURITIES IS SPECULATIVE AND CARRIES A HIGH DEGREE OF RISK. THE INFORMATION FOUND IN THIS PROFILE IS PROTECTED BY THE COPYRIGHT LAWS OF THE UNITED STATES AND MAY NOT BE COPIED, OR REPRODUCED IN ANY WAY WITHOUT THE EXPRESSED, WRITTEN  CONSENT OF THE EDITORS OF SMALLCAPNETWORK.NET. We encourage our readers to invest carefully and read the investor information available at the web sites of  the Securities and Exchange Commission ("SEC") at http://www.sec.gov and/or the National Association of Securities Dealers ("NASD") at http://www.nasd.com. We also strongly recommend that you read the SEC advisory to investors concerning Internet Stock Fraud, which can be found at  http://www.sec.gov/consumer/cyberfr.htm . Readers can review all public filings by companies at the SEC's EDGAR page. The NASD has published information on how to invest carefully at its web site.