From: steve@capital-management.us
Sent: Monday, May 10, 2004 5:59 PM
To: rule-comments@sec.gov
Cc: steve@capital-management.us
Subject: File No. S7-11-04

Jonathan G. Katz
Secretary
Securities and Exchange Commission
450 Fifth Street NW
Washington DC 20549-0609

Dear Mr Katz:

I am writing to communicate my feelings regarding the Mandatory 2% mutual fund 
redemption fee on shares held less then 5 days.

I have been in the investment business for more than 20 years. First as a 
broker and then as an SEC registered investment advisor. To begin with my 
conclusion, it is clear to me that the small investor will be the victim in 
this ruling, the mutual fund companies the winners, and the profession 
investors like myself flexible enough to adjust to the new environment.

My concern is clearly for the little guy. Especially when it is likely that 
the redemption fee initiative will provide the fund industry with adopted 
ultimately extend the redemption "lock up" period out 6 to 12 months or more. 
Additionally, the rule change will reward the very same companies your 
attempting to regulate with increased assets under management and enhanced 
performance. 

Issue do arise, and the small investor will be caught unknowingly. I have 
witnessed this for 20 years. Many small investors simply do not understand and 
will likely never understand investing. And more, I find it unnecessary to 
change the rule when you consider that there is not a single study that 
indicates that there is an industry wide problem of abusive mutual fund 
trading that passes the costs onto the long term investor. In fact, there is 
now proof (as provided by the financial restitution Janus and other fund 
companies paid to their customers - based on independent accounting of the 
cost of market timing to their long term fund investors) that the net effect 
of market timing was approximately 1/100 of one percent per year. This based 
on their own independent work to save face for their own misdeeds. 1/100 of 
one percent! And this was mostly related to the international "time zone" 
trade which we have long discouraged and found unfair. More study needs to be 
done.

Fair value pricing is a much more effective tool to deal with the stale 
pricing that short-term abusive market timers attempt to exploit. The fund 
companies simple need to use this tool. When given the choice of greater 
assets under management or simply using the existing tools already in place, I 
think that the ICI will find it in the best interest of their client (the 
mutual fund companies) to push for the penalty. This goes against the very 
creation and purpose of open end mutual funds. 

With kind regards,

Stephen

Stephen B. Blumenthal
CMG - Capital Management Group, Inc.
123 West Wayne Ave
Radnor, PA 19087
www.capital-management.us
steve@capital-management.us
610-989-9090 Phone
610-989-9092 Fax