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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 (407)	6/18/1998 8:45:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 1722

>I think the current era, the 3rd Era if you will permit, is, unlike >the preceding two, one of long term falling costs and rising >productivity. If so, this would imply that a somewhat different >(though by no means drastically different) mix of criteria of >fundamental value will have a greater success in predicting which >equities are currently selling at prices below the present value of >their long term cash flows -- than would some of the methods of the >past. I agree completely with your premise. There's just nothing new about it. There have been many periods in American history besides the "Cold War" inflation era and the big "Boom and Bust" era that preceded the present. Times when falling prices were the absolute norm and economic growth and productivity averaged above today's most optimistic projections for the future. There were always non-cyclical companies that did well even during depressions. The companies that thrive always change, the relationships between asset classes and risk premiums change, but the ways to value them are quite constant. You just have to know the company and its prospects. If you dig further back into American history you will find everything that we see today in a very general sense. It is also noteworthy that everyone in the late 20's thought that the existence of the Fed had whipped the business cycle. No one saw the Civil War, WWI, Vietnam, WWII, Korea or any other inflationary war, dictator, or new and competing philosophy coming. Nor did anyone see the oil shock or the collapse of Asia (some did!). Greenspan is also not God. I can assure you. My point being that almost every bad event in American history that changed the investment environment for the worse, was totally unexpected. There is little margin of safety in assuming perfection as a permanent state of human affairs when investing. I think it is a sure road to disappointment. One should try to invest in companies that can thrive in all environments. There are plenty.