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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 (530)	7/18/1998 5:36:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 1722

Reynolds, >Yes, stocks bought in 1929 took a long time to return to their purchase price. That's the whole point of dollar cost averaging: We don't know in advance which is the 1929 and which is the 1933 (Graham certainly didn't), but we do know in advance that the bargain priced shares have always made up for the overpriced shares over a 20 year time frame.>> I tend to agree with what you are saying. Here's a couple of thoughts about Graham and the 20's. I find it amazing that Graham was heavily invested in 29 since those aggregate prices clearly violated many of his rules. My guess about it is that his method of analysis was strictly bottom up. There were very clear credit and monetary excesses at that time that could be seen from a top down perspective. I spent my first 8 years investing looking exclusively at bottom up stuff (a la Peter Lynch - who once said that spending 5 minutes per year on economics was a waste of 4 minutes). When I started studying investment history intensely, I realized that I would have been heavily invested in 29 also. This disturbed me greatly. I was also very impressed by Jimmy Rogers' ability to recognize busts in industries and countries whose fundamentals were terrific from a bottom up perspective. (as Asia's were) I slowly moved to the Austrian theory which seemed to match much of what he would say in interviews. The Austrians have done the best work I have seen on the credit cycle, boom and bust, and international finance. Their work clarifies many things in my mind. It also would have kept me out of the 29 disaster. This is comforting to me. Lastly, it is not at all mainstream which implies that there may be some value in the alternate perspective. I am far from expert though. I am getting better daily though. Unfortunately, I still do not have any applications of economics that provide me with positive ideas. Only not so obvious risks to avoid. Bottom up is still the best way for long term investors in my view. >>missing a bottom by one month out of every 12 has been severely penalized over the long run (5% annually). And, we know that a mechanical d-c-a program takes out all of the guesswork about which months to be in the Market and which months to be out, unlike pondering how high is too high, etc. << What about if one has some simple valuation rules. Then there is no guesswork either.