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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Susan G who wrote (98611)	5/19/2000 9:04:00 PM
From: Roger Schelling	Read Replies (1) \| Respond to of 120523

Susan: Is it your experience that restaurants, airlines and some other groups, tend to look good for a while and then fade as the real industrial leaders grab the influence again? I work in the oil field industry and I know the importance of taking profits in MIND and the RIG's etc , because it is a boom and bust industry. Now it can last longer and go higher than my common sense would allow, but still they historically just 'run their course'. Thanks for the AAA list and I would expect there are some profits to be made in those restaurants. Short term longs maybe? What do you think? Roger

To: Susan G who wrote (98611)	5/20/2000 1:18:00 PM
From: lee kramer	Respond to of 120523

My trading partner Dortmunder and I just got back from my weekly session with Doc Kronkite. It was agreed that's we'd all discuss the market...kinda like a Roundtable Discussion. The palpable animosity between Dortmunder and the shrink who treated traders was quickly subdued when the doc had his temporary receptionist, Linda Lackanooky, enter with a tray of tea and a plate of raspberry scones. "I had them flown in from Hamilton, Bermuda" the doc said to Dortmunder, who nodded then said "Quite. Indeed." We were off to a good start. Kronkite, who'd suffered heavy losses in the market when his patient, Mendelbaum the Fund Manager, put him into the biotechs and internets at the top and added all the way down, had come out of seclusion and was now ready to try to recoup his losses. "So, is it time to get back in here?" he asked. "Has the market bottomed?" "That is an interesting question." said Dortmunder. "Unfortunately is is the wrong question." "What do you mean?" asked the doc. "We shall not know if the market has bottomed until well after it has done so. At this moment though. The market has not bottomed. The proper question is "How can I make money is this bear-market?" "Ok, Ok" said doc Kronkite, "How can I make money in this bear market?" "Trade the short-side." said Dortmunder. "I never go short, too dangerous." replied the doc. "Would it have been too dangerous to short ALKS when it was 100? It suffered a slight reaction to 22, though it recently rallied to 34." "Would it have been too dangerous to short CMGI at 140 ? It is currently a tad above 50. Or GOTO at 110, now selling at 18? I can go on. Shall I? "I get your point" said Kronkite. "We shall employ the Socratic method for the nonce. I shall ask you a question, you shall answer" said Dortmunder. "What prompts you to buy a stock?" "That's easy" said doc Kronkite. "I want to sell it for a profit." "And to whom?" asked Dortmunder. "Mmmm. Anyone who'll take it off my hands for more than I paid for it." said the doc. "So you believe in the Greater Fool Theory." "The what?" asked the puzzled Kronkite. "The purchase of a stock in the hope that somebody will buy it from you at a higher price." The doc thought a moment. "Yes, I guess so." "There are but two reasons...and two reasons only to buy a stock. One is the hope that someone will buy it from you at a higher price. Two, for the dividend that the company pays. Are you aware of what companies are paying out in dividends these days?" "No" answered the doc. "The average yield, or dividend, is slightly in excess of 1%. Does that excite you? And the biotechs, internets and many stocks pay nothing at all." "Mmmm" said the doc, pushing the plate of scones at Dortmunder. "And, are you aware of the Rule-of-72?" "No, I am not. But I'm sure you'll enligten me." "Indeed. The Rule of 72 is quite simple. It is about compound interest...and it is how real wealth is created and retained. You divide the yield you receive from your investments into 72. A simple explanation; Let's say you have $500,000 in Treasury Notes that yield 7%. Dividing 72 by 7% you get 10.2. In 10.2 years your investment, your principal doubles...it doubles. Thus, you receive 7% on $500,000 every year. That's $35,000...without touching your principal. Does that sound alright? "Quite" said the doc, slipping into Dortmunder's British idiom. "Could I have done something like that? I had well over $500,000 in my account three months ago before I listened to Mendelbaum the Fund manager." "Indeed." relpied Dortmunder. "Not only could you have, you should have. The remainder you could have used for trading. Perhaps a few longs, but certainly a few shorts on stocks that were smashingly topping out. Did you not observe these on your charts?" he asked. "Charts? Charts of what? asked the doc innocently and sincerely. Dortmunder shrugged, ignored this. "And perchance, did you enter sell-stops when you placed your trades?" "Never use 'em" said the doc, "Mendelbaum says I'll keep getting stopped out and miss the big move." "Quite" said Dortmunder, "You did miss the big move. Sadly for you the big move was DOWN. Do you understand the difference between a company and the stock of that company?" "Mmmm" the doc said. "Not really. But what should I do now?" "You might begin by confining your dealings with this Mendelbaum to a strict doctor-patient relationship...with no stock talk, doc. You might also log-on to the Market Gems thread. Read what some rather astute traders are doing. But above all, do not trade." What a session I thought. I'd hadn't uttered a word! Doc Kronkite thanked us and we got up to leave. Dortmunder, for the first time since I'd known him was not attired in one of his three-piece Saville Row suits. He had his bumbershoot, his trilby of course. But he was wearing a T-shirt. As he rose and turned I read on the back of his T-shirt..."I SURVIVED (and prospered) DURING THE GREAT BEAR MARKET OF 2000." (Lee)