It was a tough quarter. There is no getting around that. A few clients actually experienced very small gains in their portfolios, but most were down. The range seems to be from up 2 percent to down 2 percent, with a lot of accounts somewhere in between.

The newspapers are full of stories regarding mutual funds that were down. Our email network with other money managers tells us that many others had tough quarters too; many worse than ours.

The U.S. stock markets finished the quarter teetering on support lines that if broken, indicate that U.S. stocks are back in a bear market mode. And, I mean right on the line!

The DJIA, the S&P 500 and the NASDAQ Composite index all finished the quarter right on their rising trend lines of the past 2 to 3 years. FYI, the key number to watch is 1163 on the S&P 500. If the index breaks below that number we are back into a cyclical bear market.

The transportation and utility averages held up during the quarter, but there were few other places to hide in the stock market.

As we said then, and say again, if we really knew where the price of oil was going we could place the definitive investment bet and go home. But the world is not that simple. Within the past week Goldman Sachs has come out and said that they can see the price of a barrel of oil spiking to $105, under certain circumstances, within this market cycle. Yesterday Tim Evans, a senior analyst at IFR Energy Services in New York, announced that he believes oil prices could plummet to $28 a barrel as early as this summer. Neither Evans nor IFR Energy Services are as famous as Goldman Sachs but their credientials are impeccable. So you figure it out.

This morning T. Boones Pickens appeared on CNBC and went on record that oil will move above $60 per barrel by fall.

We live in interesting times.

As we review our major investment themes for 2005 we really haven’t changed our minds about a thing. If you are not familiar with those themes you can read about them in our annual report at http://www.kaassets.com/pubs/2005Annual/2005Annual.htm. By the time the entire year plays out, we suspect that our forecast will seem predictive and preemptive. But in case it is not—we are monitoring trends on a daily basis!

Regards,

Paul Krsek
For K&A Asset Management, LLC

Disclosure and Disclaimer (updated 11/28/05):

E-lluminations and Illumination are proprietary newsletters written for clients, friends, and affiliates of K&A Asset Management, LLC (K&A).

Paul Krsek is the sole author of E-lluminations. While the views and representations found in the newsletter generally reflect the attitudes and opinions of the K&A Asset Management “team”, Krsek writes without editing and therefore is solely responsible for the content and opinions contained in E-lluminations.

Illumination is normally published as a joint effort by Robert Andreae and Paul Krsek.

Neither E-lluminations nor Illumination represents the opinions of Fidelity, Fidelity Institutional Brokerage Group, NFS or any Fidelity affiliates. Neither Fidelity, Fidelity Institutional Brokerage Group, nor NFS has participated in the creation of E-lluminations or Illumination and they are not responsible for their contents or distribution.

E-lluminations and Illumination are written to provide general information to clients, friends, and affiliates. They are not to be taken as individual investment advice. No investment decisions should be made based on the opinions or information offered in E-lluminations and Illumination. 

K&A does not represent that this information is accurate or complete and it should not be relied upon as such. Opinions expressed herein are subject to change or modification without notice.

The investment portfolio models or management services mentioned in E-lluminations or Illumination may or may not be available in some states, and they may not be suitable for all types of investors.

The advisor representatives at K&A manage accounts with various histories and investment objectives. Various accounts may be managed differently from time to time, and by different individuals acting as investment advisor representatives.

Lead portfolio managers are assigned to make all trading decisions if an account is being managed according to a specific portfolio model. The Lead Managers assigned to various portfolio models are identified on our website at http://www.kaassets.com/choices.htm

Some accounts managed by K&A are managed individually and not subject to the discipline of a particular model portfolio. Individual advisor representatives assigned to an account have the authority to make decisions related to that account. K&A Asset Management, LLC, as an entity, does not manage investment accounts. Individual advisor representatives, or teams of advisor representatives manage accounts. Please refer to your K&A Asset Management agreement for specifics related to this disclosure and be sure that you understand who at K&A is actually managing your money.

The investment objectives of various accounts may be substantially different from one another. Therefore topics or investments mentioned in E-lluminations and Illumination may or may not apply to specific managed accounts.

Trades or adjustments to accounts mentioned in E-lluminations or Illumination may or may not happen in every account managed by advisor representatives at K&A. Advisor representatives are not responsible to manage every account similarly. Advisor representatives are responsible to manage accounts according to their understanding of the investment objectives, suitability and time frames of the owner of the account.

If you are not satisfied with the investment results in your account it is your responsibility to inform your advisor representative and to discuss possible changes that can be made to the account to accommodate and satisfy your needs.

The assets held in managed accounts at K&A Asset Management, LLC may include stocks, bonds, cash, commodities, foreign exchange or mutual funds, money market accounts or limited partnerships that represent the same. They are subject to market fluctuation and the potential for losses. The assets are not insured. The value and income produced by these investment products may fluctuate, so that an investor may get back less than they initially invested.

The advisor representatives at K&A Asset Management, LLC do not guarantee results.

Past performance should not be considered an indicator of potential future performance. If you do not consider yourself suitable, either emotionally or financially, to experience volatility and/or losses in financial markets, you should not invest.

This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer to buy any securities or other instruments mentioned in it.

Sincerely,

Paul Krsek
Updated: November 28, 2005

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