-->Conjectures Made at Halftime...............
Outlook upon the 2nd half-year 2004


The recently terminated G8 - summit on Sea Island (Savannah) gave us a glimpse of what we are likely to expect during the next six months.

The consensus which could finally be reached by the G8 participants resulted, at least in part, from the UN's Iraq resolution having been passed without an opposing vote. This resolution states that, as of 30 June 2004, the Iraq shall have its own national government which will take care of the country's administration. Henceforward, foreign troops are only expected to keep in check any riots or demonstrations, or to intervene on request of this (puppet) government.

The absence of the heads of the Saudi and Egyptian governments at the G8 - summit, despite having been invited, evidences on the other hand clearly that the laudable aim of democratization and westernization of the Arab Middle Eastern states does not meet with enthusiastic approbation in that region. Most probably, we shall soon witness the retreat of the occupation forces from an oil campaign terminated by an outright disaster. Of course, no efforts will be spared in order prevent the arising of a stir, avoiding consequently the media's attention as far as possible. The EU elections in Britain as well as U.S. polling results obtained in response to the publication of numerous factual reports show clearly that citizens are entirely fed up being confronted with martial adventures undertaken by their governments.

The concord shown in Savannah brought about a brief breathing space to prepare for new challenges. Due to the interplay of market forces, the oil price decreased again from its temporary high of
US$ 42.00 per barrel. It was above all the profit taking of speculators involved in the futures markets, who got cold feet, which caused the price of gasoline to drop from its high by at least 5 Swiss cents. Concurrently, the US currency firmed, a trend which seems likely to further continue.

It can be assumed that for investors the political day-to-day events will rank second to the increases of interest rates expected in the U.S. The bond markets have already reacted to such a possibility and further adaptations in this respect are likely, depending on the extent of interest adjustment. Bill Gross, the well-known head of the world's largest annuity fund, i.e. PIMCO of the Allianz Group, warns investors to keep their hands off stocks and bonds, because he anticipates with certainty a general price erosion taking place during the coming one or two years. Rising mortgage rates herald an end of the long low-interest period, which is hardly likely to lower the real-estate prices. The wide extent of unused office space over the whole of Switzerland does hardly promise bright future prospects in this area. Often financed with borrowed funds, these real-estate investments might soon cause bankers serious headaches.

One thing is certain: the general insecurity continues while the economic upswing so much talked about remains still in doubt. Under this perspective, fence sitting appears to be the best thing to do, watching the action at stock-exchanges from the gallery as a mere uninvolved spectator.

Zug, 15 June 2004