[PRCo] OT----Market

[Jim Holland]

Good Morning!!

> Edward H. Lybarger wrote:

> The economy's "tank" is an overreaction that will pass.  Shame on anyone who
> unloaded his stocks last week; you only locked in your losses.  The economy
> is really not in that bad shape; if we make it suffer because of our fear or
> inactivity, then the other guys won.

> Ed

	You had said you had moved into bonds, Ed, which many people do in Bear
Markets, so I thought maybe you followed Dow Theory.

	According to classic Dow Theory (by Charles Dow and interpreted by
Robert Rhea, George Shaffer, Richard Russell, et.al.), we have been in a
Bear Market since April--May--2000  --  last confirmed highs of both Dow
and Transports.   Recent events just  *hastened*  the process which 
*probably*  would have happened anyhow  --  recent events most
definitely did not cause the Bear Market although they may get blamed
for it unjustly.
	In addition to reading what the market is actually doing by confirming
highs and lows in tandem between the Dow and Transports (goods produced
by Dow must be moved to market by Transports), Dow Theory is about
Values.
	The General Rule of Thumb on Values is that a return of 6% on the Dow
Indus. average is extremely good and represents a buying opportunity
while a yield of 3% is a poor yield nearing the top of a move which thus
represents a selling opportunity.
	With the Dow at 10,500--11,000, the Dow was yielding Less--Than--1% 
--  an all time low.   Assuming dividends are not cut, the Dow would
have to drop considerably to yield 6%  --  maybe as low as 4,000!   And
if dividends  *are*  cut on the way down, then the Dow would have to go
lower!
	And much as the  *Irrational--Exuberance*  (to borrow a term) has
carried the market to record extremes of late on the upside, so too it
is possible that mania will cause the market to drop further than
reasonable values down to Super Values on the downside!

	Please note that Dow Theory is a study of what the market is actually
Doing  --  it is not predictive of future moves and directions  --  and
like the way up is interrupted with corrections, the way down has
deceptive rallys as well.   And because the Dow Theory works on
confirmations between the Indus. and Transports, the tops and bottoms
are only determined after--the--fact.   But the key is to be invested in
harmony with the  **Primary--Direction**  of the market  --  and That 
**Primary--Direction**  now is down, a Bear Market.
	What  *may*  happen in the future can Only be  *assumed*  from similar
past market action, and the market can change direction anytime it
pleases.   The trick is to read what the market is doing and to
determine the  **Primary--Direction**  and invest accordingly.

	I have also heard that if one can average a 10%--annual return on
investments that this is   **Extremely--Good**   (this 10% yield would
include both dividends and appreciation  --  and this is purely a
Rule--of--Thumb.)   I apply this to many other things as well, even mail
lists.   If the mail lists return 10%--good information, then one is
extremely lucky.   That means there is a tremendous amount of garbage
out there as well so it is sometimes difficult to  hang--in--there  as
we say.
	True, not all unwanted information is garbage  --  important to
remember this  --  it is just information that is not interesting to
some  --  personality and character differences is all this is.   But it
is through these differences that we can have a much more complete
picture of a topic as each contributes from a unique perspective!!
	Trouble is that it is difficult to remember this all the time and to
apply it!!(:->)

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James B. Holland

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