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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (5120)	10/9/1998 12:27:00 AM
From: Ron Bower	Read Replies (1) \| Respond to of 78552

Paul, An opinion. The market corrected because it was overvalued. It corrected more than the hedge funds and margin players anticipated and they are now being forced to cover their positions. This is adding to the freefall, particularly on NASDAQ issues. Add some investors wanting to lock in profits by selling or withdrawing from funds and you end up with equities selling under value. I would not buy any company with debt. IMO Banks will be tightening loan policies and note renewals will be hard to get. They will be pressuring borrowers to reduce loans because of declining asset values. Look for well managed companies with strong cash positions. Avoid companies that have been expanding thru acquisition because they now have paid too much. JMHO, Ron

To: Paul Senior who wrote (5120)	10/10/1998 2:22:00 PM
From: Paul Senior	Respond to of 78552

Wow,do I have losses! Pretty bad out there now according to my portfolios. It's hard for me to sell a stock as it goes to new lows. I believe, most times there is EVENTUALLY a reversion back to the mean - but it can be a long, painful wait. Unfortunately, it becomes easier to think that with very deep drops in a particular stock position and/or perhaps years of waiting, it is not 'most times' but instead, the market is smarter and the stock will not ever come back or achieve the ruling reason why it was bought in the first place. And sometimes - too many times -g-, this is true. For example I own UC and it looks like these subprime lenders are all very possibly going out of business. (Per article in WSJ). At least 2 have just filed for bankruptcy. With these businesses (subprime lending) it is very likely the market was right ---investors like me coming in to buy under book (at 16 and averaging down at 9)--we're very, very wrong and we're going to pay for it (stock about 5 now, bounce from 3). In some of these cases -- like here - UC - where the business has just stopped so abruptly or been so disastrously affected by interest rate declines and securitization issues, I'm not even sure the insiders were able to protect themselves by selling their own positions. My point is that it must be the portfolio that counts, not individual stocks. That is why I own a large and well-diversified selection of stocks. Value stocks as well as growth-type. And since value stocks have something against them (or they wouldn't be priced to be a value), I want to be invested in a VERY broad spectrum of such value-types. To me it's a very statistical game -- everybody in the world - except Warren B and maybe his partner Charlie - everybody has losses. It's got to be expected. And we've got to move through it and onward with our financial plans. But even with all that, large losses are terribly painful, they stick in one's craw for years- maybe decades (I've got one from from a PVC pipe manufacturer in '73 that will be in my memory forever apparently), they are embarrassing to talk and think about, and worse --they put doubt in our minds about our abilities, our sanity, and the wisdom of even being in stocks at all. So weeks like last week do indeed remind me that this volatility also challenges our mental game. Paul Senior