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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Larry P. who wrote (31629)	8/26/1998 10:16:00 PM
From: Joseph G.	Read Replies (2) \| Respond to of 132070

In the latest issue of Fido Focus Lynch talks about how it may not be a good idea to be fully in stocks when, in his words, "normal valuations" for stocks of P/E between 10 and 20 have been exceeded. Also talks a little about how it has not been wise for a Japanese investor to buy dips in "their Dow", his words again, on the way from 39,000 to 14,000. His views were expressed as of July 2, 1998, subject to change ... Can't blame him anymore after the market tanks - he's hedged. -g-

To: Larry P. who wrote (31629)	8/27/1998 12:04:00 PM
From: Knighty Tin	Respond to of 132070

Larry, I do not time the domestic market. I do value it relative to its alternatives. If it is overvalued on my model, then I cut my exposure. If it is undervalued, I increase my exposure. That is not really timing, as I am just buying when it's cheap and selling when it is expensive and looking elsewhere for value. I do the same thing with frozen foods and laundry detergent. <G> I also feel no remorse if I miss some of the upside in the domestic market, as folks who manage traditional portfolios must. They are graded by how well they do against other players in the same market. An incestuous bunch. <G> The problem with buy and hold advocates is that they are working from myopic vision. If you bought the Dow in 1968 and held it until 1982, you lost 70% of your spending power. That is a move I don't think anyone can stand, no matter what his age. Another problem is that most of the buy and hold folks are measuring from some point in the past to the current bloated top. This is called lying with statistics. None of them measure from tops to bottoms, as that would be painful and a marketing Edsel. For example, if you bought the Dow in 1929, you got even in 1952. That would not be a good measurement period for selling your wares, so they ignore it. Today is reality and other periods of time can never happen again. <G> Also, buy and holders totally ignore the fact that there are other markets and even a myriad number of ways to trade the stock market other than buying and holding stocks. For example, when I was buying palladium futures at the bottom, I didn't see Dave, Warren, or Peter anywhere. If you asked them why they weren't buying palladium, they would have given you a confused look and said, "that's not what I do." (Well, Warren did eventually buy silver futures, but he was late and wrong, so it doesn't count.) Or, if you ask them why they didn't buy puts or calls on a stock, you would get the same blank look. That is silly. A true contrarian has to be a renaissance man or woman (but not Lucretia Borgia <G>), IMHO, looking at as many different markets and issues as possible and comparing their values. Today, in even a cursory comparison, big US stocks are overvalued relative to just about everything else, except, perhaps, US bonds and real estate. There are pockets of value, and Dave Dreman's style helps you identify them, though I think low pe ratios is only one of many factors, not the alpha and omega. What I find funny is when somebody tells me I missed the bull market in US stocks. First of all, I was long for a big part of it, but I did cut my exposure well before it peaked. And when I reply that they missed puts on Presstek or Picturetel, or palladium's price spurt, or Asian stocks in 1995, India in 1997, or several other winners, they don't get it. So, if you have no alternatives to the domestic stock market, buying and holding low pe stocks may make some sense. Dollar cost averaging makes even more sense. Double dollar cost averaging much more. But being aware of a wide range of markets and buying some of one when it is cheap and selling some of the other when it is dear, makes more sense. Using non-traditional strategies to accomplish this strategy makes even more sense. And, I would have one question: why did Dave Dreman sell his company to Kemper unless he thought that the market was toppy? Isn't that a form of market timing? <G> MB