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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 (744)	9/3/1998 8:20:00 PM
From: Freedom Fighter	Respond to of 1722

Porc, >>What I have been writing for several years is that those who mechanically dollar-cost-average into an Index product over the long term will outperform all but the most gifted (or luckiest) investors, professional or otherwise.<< I agree with you completely. I just hope you weren't calling Warren and a few others lucky. Surely you must agree that sometimes the market as a whole is too high and sometimes it is too low and that some people can exploit that better than DCA. This is easy to prove. Either it was too high a few weeks ago or it is too low now. Either is was too high in 87 at 2200 or too low at 1700 the day after. By the way, I hope you know that I think that that is a very rare occasion that the market is out of whack. I like your version of DCA. Put almost the same amount in the market yearly, but into the individual issues deemed undervalued.

To: porcupine --''''> who wrote (744)	9/4/1998 10:36:00 AM
From: Freedom Fighter	Respond to of 1722

Dividend Yields vs Bond Yields (Abby and Byron) In the former debate years ago between investors on whether stocks had become overvalued when they reached the point that dividend yields were lower than bond yields, I have these observations. The value of a business has nothing to do with what dividend it pays out and what the dividend yield is. By those standards, Microsoft and Berkshire Hathaway would be overvalued since the first day they traded. Neither pays a dividend. The value of a business is related to the amount of money a business COULD pay out if it chose to do so and the growth of reinvested capital. In combination! Investors of past generations preferred the security of dividends because of their experiences. Hence companies distributed a higher percentage earnings as dividends. As a result of this, they reinvested less (lower retained earnings) and grew EPS more slowly. As times progressed, investors became more comfortable with the idea that retained earnings that were reinvested lead to higher EPS and subsequently, higher stock prices. So it didn't matter to them how they got their profit, dividends or capital gains. Once acceptable, it made much more sense for many companies to retain more of their earnings. They could generate superior returns because they had high return possibilities on reinvested capital. like Berkshire Hathaway, Coke, drugs, Microsoft etc..) Nowadays, investors have also become comfortable with the idea of share repurchases instead of dividends due to the tax advantages. My point behind this discussion is such. The Values and the way to measure them has not changed from back to the beginning of security analysis in this area. What has changed is corporate finance. Those investors that thought that stocks were overvalued because the dividend yield dropped below the bond yield may not have understood how to value a business. They failed to recognize the change in the behavior of companies. They were using a model that did not value businesses. They were using a simplified signal. It is almost certain that the "true giants" of that time were well aware that no fundamantal change had occurred in the way to value businesses. It was just a WELCOMED change in corporate governance. Just as I have been buying companies that liked to repurchase shares long before it became fashionable. Wayne Crimi Value Investor Workshop members.aol.com