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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (377)	6/8/1998 12:24:00 AM
From: Berney	Respond to of 1722

Re: Forbes Articles I read both the Forbes articles last night as I was sitting on the John. Thereafter, I flushed twice. To both I say poppycock! Mr. Smithers asserted that: "Today's stock market is a wonderful Lake Wobegon world, where all companies are above average ". Bunk! Yes, many companies are at such lofty levels that it is difficult to see how stock appreciation can possibly be realized over the next decade. But to paint all stocks with the same brush ignors the obvious: many companies still represent great value. Mr. Dreman chose to express the concern regarding being in cash by discussing market volatility. I don't see the appropriateness of a comparison of the beta of cash to the beta of stocks, or the need to attack the use of beta at all. Let's concede the need to have a well-diversified portfolio of equity, fixed income, cash and other investments that reflects the individual's attitude toward risk, investment objectives and investment time horizon. As I remember, the purpose of investing is to create an increase in purchasing power for some future "need". I refer to this as desiring an increase in real economic wealth -- an increase in purchasing power after taxes and after inflation. Thus, investing involves voluntary risk and necessary risk. Mr. Dreman's assertion that only the very old should be concerned with market valuations is absurd. Many of the depression children have a considerable hoard of wealth and a nice pension that satisfies their current needs, wants and desires. Maybe it is the circle in which I operate, but I see, time and time again, depression children that are not touching their investment principle, only marginally touching their investment income, and their investments are growing geometrically. They have and continue to live modestly, and Society has been kind to them. Many of this generation, have no need to assume any voluntary or necessary risk. The consumption oriented baby-boomers may involve a different story. The lifestyle of many has precluded any significant investments and many have significantly greater expectations of the future. In addition, many, particularly working women, will not have the juicy pensions and retirements that were available to their parents. Einstein called the investment equation, the greatest mathematical formula ever created. It involves only three attibutes: principle, time, and investment return. Thus, if one is starting late, has little to invest, and has a relatively shorter time horizon, then one must take greater risks. It is simply a function of math, and, yes it is these folks that will be hurt the most if the risk proves to not have been prudent. Such is life! I doubt that either author would believe that both cash and equities should not be represented in most portfolios. So, we get back to the purpose of the thread -- Value Investing. Assuming one needs or voluntary desires to assume the added inherent risks of the equity markets, what specific investments should one make to satisfy his/her objectives. DUH! Berney

To: porcupine --''''> who wrote (377)	6/10/1998 2:50:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

Greenspan: Economy Best in 50 Years By Martin Crutsinger AP Economics Writer Wednesday, June 10, 1998; 11:45 a.m. EDT WASHINGTON (AP) -- Federal Reserve Chairman Alan Greenspan, calling current U.S. economic conditions the best in his 50-year career, signaled today that the central bank saw no need to end the party by raising interest rates. Greenspan cited an unusual amount of uncertainty because of the continuing economic turmoil in Asia. But so far, he said, the American economic expansion, now in its eighth year, has not been threatened. ''The current economic performance, with its combination of strong growth and low inflation, is as impressive as any I have witnessed in my near half-century of daily observation of the American economy,'' Greenspan said in testimony before the congressional Joint Economic Committee. Greenspan noted that even with unemployment falling to 4.3 percent, the lowest level in 28 years, and growth spurting ahead at a 4.8 percent rate in the first quarter, inflation had actually declined this year. He called the combination of strong growth and low unemployment ''extraordinary.'' He said there were signs consumer prices were beginning to rise at a slightly faster pace in recent months, but he termed the pickup ''quite moderate overall.'' While indicating that Fed policy-makers would remain alert should price pressures intensify, Greenspan said the central bank saw no immediate threat in this area. ''We at the Federal Reserve, recognizing the powerful forces of productivity growth and global restraint on inflation, have not perceived to date the need to tighten policy in response to strong demand,'' he said. These comments were likely to cheer financial markets. Investors had grown concerned in late April that the central bank might believe the economy was growing too quickly and growth would have to be slowed to keep inflation under control. Those worries were heightened by a leak in late April that the central bank had at its March meeting changed its tilt from neutral to leaning toward higher rates. That unusual leak, which was confirmed when the central bank released minutes of the March meeting, heightened worries in financial markets. However, various economists noted that recent public statements by other Fed officials and Greenspan seemed to indicate a continuing belief that there was no need to raise rates at the moment, given the good inflation performance and continuing uncertainties about the Asian economic crisis. On Asia, Greenspan said the financial turmoil in that region had caused the U.S. trade deficit to widen significantly but that had been offset by the continued strong domestic demand. He cautioned that ''uncertainties about the degree of restraint that will be coming from abroad remain substantial'' in large part because it is impossible to tell how quickly the Asian nations will recover. Greenspan, who in December 1996 wondered whether ''irrational exuberance'' was pushing stock prices to unreasonable levels, did not repeat that concern today. But he said ''investors seem to be expecting that low inflation and stronger productivity growth will allow the extraordinary growth of profits to be extended to the distant future.'' As in previous appearances before Congress, Greenspan repeated that he believed the U.S. economy had entered a new stage in which productivity, output per hour of work, was beginning to accelerate after two decades of weakness. But he cautioned that rising productivity alone would not be enough to keep inflationary pressures at bay if the demand for workers continued to outstrip the supply. Greenspan said he expected the U.S. economy would slow in coming months, in part because of the need to work down a huge buildup in unsold inventories in the first three months of the year, and the continuing Asian impact on the trade deficit. But he said, ''If developments such as these do not bring labor demand into line with its sustainable supply, tighter economic policy may be necessary to help guard against a buildup of pressures that could derail the current prosperity.'' c Copyright 1998 The Associated Press