Some interesting strokes from knowledgeable folks...
biz.yahoo.com
Wednesday January 5, 2:05 pm Eastern Time
What This Stock Market Needs ...
NEW YORK (AP) -- A few stock market views from some experienced, conservative, sensible folk who have seen it all before:
Such as H. Bradlee Perry, who observes that anyone ''who postulates that stocks are less risky than bonds is living in a foolish, dangerous dreamworld.''
Perry, who delivered his views at the 50th anniversary dinner of the Financial Analysts Society of Detroit, is a former chairman of David L. Babson & Co., investment counselor.
He went back a way to make his point, reminding listeners of the observation by Prof. Irving Fisher in 1929 that ''stocks have reached a permanently high plateau.''
That, of course, was the year of the great crash, in which the professor, a genius to contemporaries, lost everything, including his house, which Yale University bought and rented back to him.
Perry is concerned about volatility. As he told the Detroit audience in October, ''the average holding period for all the publicly held shares of Amazon.com (NasdaqNM:AMZN - news) is just eight days!''
For Dell Computer, he continued, ''it's four months, Microsoft (NasdaqNM:MSFT - news) six months, Cisco nine months, and Wal-Mart 18 months.'' Who, he asks, will stay the course when times become difficult?
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Gerald W. Perritt, a former mathematics professor and author of several books of stock analysis, expresses his views in the ''Mutual Fund Letter,'' which he founded and has edited since leaving academe.
''I know that great fortunes will be made by investors who own stocks of companies that will benefit from the great technological explosion,'' he says. But the past too has lessons for us.
And so, he explains, ''I plan to continue to employ the conventional wisdom I've learned from more than 30 years of stock market experience.''
The new paradigm contends that diversification only reduces investment return, and that if you want big gains you must invest in only a few stocks. Perritt will reduce risk by diversifying.
The new wisdom says you should day-trade stocks and pick up handsome profits. He will invest for the long term.
New thinking says ignore price-earnings ratios and buy what's moving. He will avoid all stocks with unreasonably high price-to-earnings ratios.
The new paradigm maintains that a stock not already rising isn't worth buying. Perritt says he will invest in ''beaten down, out-of-favor stocks'' that he feels are reasonably priced.
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The analysts at Wright Investors' Service hold firm to the philosophy of its founder, John Winthrop Wright, that the funds it manages (in the billions) must meet fiduciary standards.
While that doesn't necessarily rule out investments in some of today's high-tech companies, it does mean that such investments meet very high standards of management, earnings and longevity.
Wright goes by long-term performance numbers rather than short-term emotion. And so it asks rather coldly, if high P-E stocks soar when interest rates fall, what is their downside when rates rise?
While Wright doesn't expect further significant moves to raise interest rates by the Federal Reserve, it believes there's ''enough risk of such an outcome to make record P-E multiples of many growth and technology stocks appear reckless.''
KJC |
