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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Mason Barge who wrote (6033)	6/26/1998 10:40:00 AM
From: Robert Douglas	Respond to of 10921

Mason, you wrote earlier: So I've decided the only way to play the market is for ultra-long term capital growth, and just take the big declines without complaint. I too have taken this philosophy when it comes to investment for exactly the same reasons you list in your post. I have never seen anyone successfully time the stock market for any extended period. This methodology has served me well the past 20 years and I would certainly hesitate before adopting another. This being said, I have recently begun to lighten up on my holdings and hedge (via the futures market) my don't touch positions (those with enormous gains and multi-year holding periods). The reason that I have begun to do this is not a change of heart but rather a realization that the risks in equities have now begun to outweigh the rewards. Let me list just a few of the salient points. 1. The bull market of the 90s has been driven by rapidly growing corporate profits. This profit expansion has been created by rapidly expanding profit margins that have reached the level where they are not sustainable. Wages are rising and benefits may be about to join them. This will pressure margins as will the rising dollar. Profit margins cannot rise further and will likely decline. How will stagnant or declining profits be viewed by this market? By the way this has already begun. 2. The market is selling at an historically high multiple of these peak earnings. A double whammy when it reverses. 3. The United States cannot go on being the demand engine of the world forever. The US must receive help from Europe and Asia or risk igniting an inflation that we have worked so hard to control. I believe if (when) the Federal Reserve is faced with the choice between fueling inflation in this country and supporting Asia by running an expansive monetary policy that they will choose to raise rates and fight inflation. They may face this choice as early as this fall, in my opinion. 4. This market is being fueled by a blind mechanism of retirement money and mutual funds who are committed to being fully invested regardless of the valuation levels. A fools game if you ask me. If I am right and the next move in interest rates is up then cash balances will likely earn as much as equities with much less stress. I have cautiously begun raising cash. Soberly, Robert

To: Mason Barge who wrote (6033)	6/26/1998 9:25:00 PM
From: Jess Beltz	Respond to of 10921

Mason, in general you're probably right (about the market.) I would say that eventually fundamentals do find their way into valuations, and for some stocks, a hard rain is going to fall. You're investment strategy will play out well for (for example) stocks that have already been beaten into the ground, but are really sound companies. I have a sector in mind IF an important set of fundamentals will turn around. About LTC and Sumitomo, no comment. I simply don't know how that will play out. jess