1. MPSIF
Fixed Income
November 3, 2003

2. October in Review October 1 October 31 Change
Dow Jones %
S&P %
Nasdaq %
10 Year Note bp
$ / Euro %
Yen / $ %
Fed Fund Fut (Apr) %

3. Jobless No Longer? October Payrolls Reinforced by Claims
November extrapolation?
Reinforced by Claims
4 weeks now at roughly 390,000
Below critical 400,000 level

4. This Week ISM to reinforce Chicago PMI? Claims: Do we hear 5?
Payrolls, payrolls, payrolls!

5. Yield Curve 2003

6. Outlook for Rates Accommodative Fed Asset Reallocation Supply
Risks once again focus on deflation
Asset Reallocation
Economic engine ‘Primed’
Supply
Geopolitical Wild-Card
Flight to quality, Consumer confidence
“Tethered” short end, steeper curve

7. Concerns One month aberration in payrolls Continued jobless recovery
Productivity
Geopolitical
Which “V” word?

8. Fixed Income Overview
10 year was 3.97% at our 4/21 meeting. Current 4.30% level represents a 33bp widening.
After a turbulent summer, 10 yr has continued trend upward in yield.
Mortgages no longer as attractive, as summer events showed risks of being ‘short vol’.
Yield not as easy to come by
High Yield, Corporates have tightened significantly throughout 2003.

9. Performance of Funds 6 months, 4/21 – 10/21

10. Current Holdings and trade ideas
Symbol
Value
Current weights
Target Weights
Target $ amts
Buy/Sell
Duration
Duration weight
Old Duration (compare)
CMHYX
$54,160
10.4%
0.0% $0
($54,160)
4.15
0.00
0.43
IEF
$48,335
9.3%
($48,335)
6.47
0.60
SHY
1.65
0.15
LQD
$225,004
43.3%
46.3%
$240,597
$15,594
6.49
3.00
2.81
MGIDX
$173,282
33.3%
($173,282)
2.10
0.70
CASH
$19,011
3.7%
VSGBX
5.7%
$29,730
1.70
0.10
PTMDX
35.0%
$182,119
0.74
TOTAL
$536,038
100.0%
3.99
4.54
VBMFX
4.40
Long/Short Duration
-0.41
CMHYX: High Yield Corporates LQD: Investment Grade Corporates
IEF: Treasuries, 7-10 year SHY: Treasuries, 1-3 year
MGDIX: Manager’s Mortgage Fund PTMDX: PIMCO Mortgage Fund
VSGBX: Vanguard Agency Fund

11. Sector Weights vs. Index$ %
Index % (VBMFX)
Over/ Under Wt
Governments
$78,064
15.0%
26.4%
-11.4%
Treasuries
$48,335
9.3%
15.2%
-5.9%
Agencies
$29,730
5.7%
11.2%
-5.5%
Corporates
$240,597
46.3%
27.4%
18.9%
Investment Grade
 27.2%
19.1%
High Yield
$ 0
0.0%
0.2%
-0.2%
Mortgages
$182,119
35.0%
41.9%
-6.9%
Cash
$ 19,011
3.7%
Foreign $
4.4%
-4.4%
TOTAL
$519,791
100.0%
Our allocations vs index (Vanguard Total Bond Index) IF WE INCORPORATE THOSE TRADES. We are overweight Corporate Bonds and Underweight in Government Bonds (Treasuries and Agys). We currently have no allocation to foreign fixed income instruments, as we have just chosen this index. Something that will be researched for next semester (not pressing as it is less than 3% of index)

12. Actions taken to date: Actions to be taken:
Agreed to move to a short duration position versus index
Agreed to liquidate High Yield holdings, as they do not comply with our investment guidelines.
Actions to be taken:
Research allocating money to a foreign bond fund.
More research into purchasing individual bonds ($5000/30?)
Better alternative funds
Research minimum risk portfolio using mutual fund return regressions