VOLUME 01: ISSUE 02 For info, visit access.smallcapnetwork.com Dow Jones 8847.56 NASDAQ 1498.80 S & P 500 1040.94 Russell 2000 404.87 Dear SmallCap Network Member, WEEKEND EDITION LOOKING AHEAD: U.S. equities spent the past week on the mend, along with the psyche of the nation. Interesting parallel's between the current situation and the early 1960's are already being drawn. In 1962, America faced off against the U.S.S.R., a burgeoning superpower attempting to place nuclear warheads in Cuba capable of reaching New York or Washington, DC in minutes. While not a criminal, the villain of the day was Nikita Kruschev, who boldly promised that the Soviet Union would "bury" the United States. President John F. Kennedy and his clan hunkered down in the White House and showed historic resolve. America faced the fear of global nuclear destruction head on. Stocks were in a bear market as we embarked on what became a very lengthy "war" against the Soviet Union and Communism. Ultimately, we were successful. Today, we face a different type of enemy. Certainly one that doesn't have nearly the resources the Soviet Union had in those days. The stock market now trades "ex" the "peace" dividend according to the mainstream media. As a nation under attack, who could doubt our determination, fortitude or will to succeed in the face of this latest threat. Unity and a positive outlook will be as important today as they were yesterday. Even in the face of these new threats, the outlook and the will of the American people is as strong, maybe even stronger than ever. The most important trait necessary to achieve outstanding investment results is patience, followed by discipline. Just because micro and small cap stocks have a higher degree of risk than blue chips doesn't mean the approach to owning them is any less calculated. Fear and greed remain two of the most prevalent traits that adversely affect the performance of most individual investors. Lately, investors large and small have been selling stocks in an effort to alleviate their fears. To help you avoid such pitfalls, we invite you to review the TRADING STRATEGIES section of the SmallCap Network web site. To be removed, please click here. FIVE FACTORS THAT COULD AFFECT PORTFOLIO PERFORMANCE IN THE NEXT TWELVE MONTHS. 1) INTEREST RATES WILL GO LOWER AND SHOULD REMAIN LOW. The Federal Reserve's biggest fear is inflation. The recent crisis has likely removed this fear as a major policy "driver" over the next six to twelve months. The question will be, how low can rates go? 2) EXPECT A CONGRESSIONAL DEBATE ON CUTTING THE CAPITAL GAINS TAX. No tax is a greater growth inhibitor than the capital gains tax. More than 50% of Americans now own stocks. Expect the liberal argument of "the rich getting richer" to be thrown out the window. 3) MISSILE DEFENSE SYSTEMS and AIR SAFETY is back at the top of the Administration's agenda revised agenda. The U.S. must allocate the resources to develop solutions to secure our airspace. Many small companies (and certain large ones) will likely benefit from the effort to make this happen. 4) EXPECT CORPORATE TAX CUTS in an effort to jump start the economy, create jobs, and alleviate the recent jump in unemployment. No government action could do more to get many displaced Americans back into the work force. 5) TECHNOLOGY WILL MAKE A COMEBACK. America is the world leader in technology development. Even though the bursting of the tech bubble led to the current bear market, our world leadership in this vital sector cannot be denied. The current bear market is the third longest and fourth deepest on record. Today's GDP numbers for the second quarter showed the economy grew 0.3%, two tenths higher than the number most analysts had revised lower over the last few weeks. That notwithstanding, third quarter GDP numbers will probably drop us into a recession. This evidence lends credibility to the argument that an economic recovery probably would have begun in the fourth quarter. Such a recovery has likely been been pushed into next year. Consumer confidence has taken a major hit and needs some time and additional "incentives" to recover fully. So U.S. automakers have unveiled plans to offer interest-free financing for new car buyers and Nordstrom has announced plans for an "unprecedented" Fall sale. We may not be out of the proverbial woods yet, but we are certainly on our way! If you'd like to update, change, or add a new address please click 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 registered investment advisor or broker-dealer. 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