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MARKET COMMENTS

In our opinion, the "Dow" and the S& P 500 remain fully valued! The mini-micro caps within the US are the cheapest segment that offer minimum risk with very attractive long-term appreciation potential.

The risk outside of the US is much less - those markets have already been slaughtered, namely, Asia, Russia and Latin America. The "real" risk in those markets, in our opinion, is not having a position in them. The next move in these areas of the world is UP!

Within this newsletter we intend to concentrate on the riskiest area of the world, namely, RUSSIA! This market is roughly 90% off its 52-week high.

The opportunities mentioned are geared toward risk tolerant, patient and investor type that can relax for 3 to 5 years. These opportunities are not geared toward day traders!

The internet offers excellent information with respect to foreign investments.

Our three favorites:
• www.adr.com - most foreign companies are fully documented.
• www.ufg.ru
• www.ufg.ru/research/equities/htm - great review of Russian stocks.
• www.ft.com - this on-line newspaper, which is free, is a must read.

We still remain nervous about the earnings projections for 99 and suggest investors take profit in the current rally. It is evident that the Fed will most likely lower rates at least once before year end. The market looks for an additional easing as early as mid-November, 1998. This scenario, of course is currently being factored into the market. The recent GDP of over 3% for the third quarter means something, but has little to do with possible devaluation within important industrial nations, namely China and Brazil. The world economy continues to slow and lowering of interest alone within the US doesn't guarantee an economic "soft landing" within the US. We again suggest that investors should lighten up on expensive Dow and SP500 issues and carefully nibble at the depressed and out-of-favor issue.

Yours truly, William Velmer (Nov 2, 1998)

SUPER FAST PHONE SERVICE RECOMMENDATION

1. On September 23 phone service subscribers were informed to sell remaining position in JAWS. Initially recommended March 30, 1998 @ $1.125, sold 1/2 on May 13 @ $3.06, selling remainder at $3.28. We also informed our phone subscribers about VIP and LUKOY.
2. Evening of September 23 e-mail subscribers informed to sell JAWS and buy VIP, LUKOY, PCSH and speculate in GGNC.
3. On September 1 e-mail subscribers informed about "the end of the world" bargains, namely, AAP, AMAT, CYMI, DO, EGLS, HAL, HP, KLAC, RIG, SEG, TWD, CPQ and WALBP.
4. On October 16 e-mail subscribers informed about our "new" recommendation on HMDL @ $3.375.

New Buy Recommendation
LUKOIL - Russia (OTC - BB- LUKOY)
LUKOIL is Russia's largest oil producer and considered to have the 4th largest oil reserve in the world. The 52-week range of the listed ADR is $123 - $8.25. We hear listing on NYSE is being considered for early 99.

The major shareholders of LUKOIL at present are the Russian Government (26.6% of the issued shares), Bank of New York - as a nominee for ADR and GDR holders (28.2%), companies of the Russian NIKOIL Group (17.7%), LUKOIL-Garant pension fund (5.3%). As at June 30, 1998 the officers of LUKOIL comprised 65.5 thousand holders of ordinary shares and 52.6 thousand holders or preference shares.

On October 29, 1998, LUKOIL announced that output of oil and gas condensate was 39.67 million tons.

FACTS
1. Most domestic oil is located within Siberia.
2. We see little chance of nationalization.
3. LUKOY has downstream operations (refineries, gas stations).
4. LUKOY reserves are larger than Exxon and BP.
5. Price to sales around .2 while most oil companies have a price to sales of over 1.
6. Have a gas station in Virginia, USA.
7. The company is currently considering a buy back of its shares (cannot verify).
8. LUKOIL has and continues to implement restructuring and cost-cutting measures based upon the assumption that world crude oil pries aren't likely to rise in the near term. Alekperov, the President of LUKOIL has been settling debts and paying salaries in a timely manner.
9. LUKOIL can be purchased for a fraction of its recent 52-week high and its initial IPO price.
10. One time sales for LUKOY is near $100/sh.
11. LUKOY's book value is around $60.00.
12. The Russian market is totally out-of-favor, the oil stocks have also been slaughtered. Everyone hates foreign investments. We think all of this is SUPER BULLISH.
13. Oil and gas have intrinsic value. It is only a matter of time before prices firm and head higher.
14. Most world market trade around GNP Russian stocks are currently trading at single digit of GNP.

Everything about Russia indicates risk to the average investor type, but for us at S.A. Advisory we smell opportunity. If everything was wonderful, LUKOIL and the like would be 10x the current price. In our opinion, the real risk is not owning this issue.

Russia has stumbled, but we believe that it cannot turn back.

We believe that LUKOIL may be the cheapest non-domestic investment opportunity that we have ever seen.

We continue to buy LUKOY at current levels. We believe that it will remain volatile, but offer a double play on Russia, that is, high oil prices and greater stability in Russia. The current price indicates the worst!

Broker contact: Greg Nelson at 1-800-269-9460;

LUKOIL Investor Relations: phone (+7) 095-927-4885. e-mail: [email protected]

LUKOIL internet address: http://www.lukoil.com

Press service: phone (+7) 095-927-1677, e-mail: [email protected]

We intend to monitor LUKOIL within our international portfolio and also our model portfolio for percentage gain performance.