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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Judith Williams who wrote (35561)	11/28/2000 8:14:52 PM
From: Mike Buckley	Read Replies (3) \| Respond to of 54805

after the wild ride last year perhaps for a bit that will have to be solace for the steep declines. Bingo, Judith! From the Naz's beginning value in 1999 to it's high in March, 2000, it increased an unprecedented 134%. Folks! If you're not aware of that, repeat it three times: 134%. Despite that the index has fallen 47% from that high, it still remains a very, very respectable 25% higher than its opening value at the beginning of 1999. Let's put that in perspective. Assume the Naz's value is the same on the last day of the year that it is today. Also assume that your portfolio did nothing other than match the Naz's performance. Also assume the Naz performs at that rate of growth for years. Making those assumptions, your portfolio would double approximately every 6 years. Depending on how much your portfolio outperforms the Naz, it might double every five years on average or maybe in even less time. Is the Naz likely to perform at that rate over a long time? For more perspective, the broad market has indeed performed at very close to that rate for decades and decades. If you believe as I do that technology will power the world economy for coming decades, you probably also believe that the Naz will outperform the broad market. So expecting that your portfolio might double at least every 6 years on average based on the performance of the Naz in 1999 and 2000 (so far) is not an unreasonable expectation. But if over 3 to 5 years your portfolio doesn't outperform the Naz, I think you should give very serious thought to investing in QQQ or in an ultralow maintenance, ultralow-cost index fund that mirrors the NAZ. Paul (at least I think it was him) suggested in last night's discussion that it's dangerous to invest only in high-tech stocks. I disagree if those high-tech stocks are gorillas and leading gorilla candidates of rapidly growing mass markets, if they are judicisouly selected with the kind of research needed to reduce risk, and if they are given long-term periods of time for their business to increase. I think the point Judith makes is about volatility, not risk. Too often people assume that high volatility equates with high risk and that low volatility equates with low risk. There's no logic to that errant conclusion. However, volatility is a reasonable, understandable concern for investors. Many investors simply hate volatility. One of the best long-term investors I've ever met is seriously considering eliminating all use of LEAPS because she and her husband aren't comfortable with this year's volatility. It makes them stay awake at night. Each of us needs to make a personal decision about the volatility we can accept. For me, I always operate under the belief that any stock at any price in my portfolio can tank 50%. And if it does tank 50%, that it can tank another 50%, etc., etc. Not everyone wants to accept that kind of volatility. The people whose enjoyment of life is understandably diminished due to the volatility we've seen in the markets in the last couple of years should not have a portfolio made up solely of Gorillas, wannabe Gorillas and leading royalty plays. For those who come to that conclusion, more power to them. However, they shouldn't come to it under the misconception that they're doing so because they feel the portfolio is unsafe when in reality it's because it's too volatile. --Mike Buckley

To: Judith Williams who wrote (35561)	11/29/2000 1:42:54 AM
From: chaz	Respond to of 54805

Judith, You wrote: Plus, they are just plain fun to puzzle through. I had the neatest career I could possibly have imagined for myself. Everywhere I went, the people I talked to were making something that had never been done before. They were dedicated, innovative, highly imaginative men and women who relished their work and were proud of it. Many, many of them were college dropouts, more ready to invent things well beyond the levels of their class work than to hang around for a degree and "miss Christmas" as some of them put it. All but a few of them had trouble communicating because their focus was on the "thing", not it's benes. That part was my act and while I understood it, I never put all of it in the same kind of orderly thought that GM and friends did. I could see how the electronics industry was an orderly structure (I likened it to the tire business) in the tradiitional American commerce fashion, but the notion of chasm, bowling alley, main street etc never dawned on me. So that's why TFM was such a big deal for me. I most emphatically agree with you that the companies we watch will continue to invent, to push the envelope, to give us all new things and new opportunities. So here I am, retired, many years away from day-to-day contact with this technology field, doing my woodworking for funzies and comic relief, and still fascinated with what once drove me to the office by 7:00 am. Actually, living on the West Coast again, that's now 6:00 am. We'll get through this, and so will the companies we watch. Keep your head, guard your capital, and get set for another leg up...but please, give this leg down time to spend it's energy. Best to you, Chaz