Questions, Answers and More on Asset Allocation

Q1: Seems like every time Bob Brinker, of ABC radio's Moneytalk, says "get your allocation in line" it's a warning sign that he thinks the market will correct. Is this a coded warning perhaps? The last few corrections, I've just held in there, but I wish I had sold a few things before the correction last year when Bob was saying the same things. These market valuations are making me dizzy.

A1: Bull markets climb a wall of worry. Are you aware that the DOW is at the SAME level it was 1 year ago? Valuations are actually a bit better now. For the S&P500, ONLY a few stocks are really out of whack, possibly not the "nifty 50" but more like the "amazing ten" or something. If the rest catch up and these stay where they are, this would be a good thing.

You ask if Bob Brinker was speaking in code when he said to get your asset allocations in line again Sat 1/20/99. My answer is Bob does not need to speak in code. Bob was very clear. He has said that valuations were at historic levels and thus a correction, not bear, is possible but not guaranteed, that the market is ripe for a correction and he has a price target to go from DCA to lump sum investing. He and many, many other advisors say timing short term market glitches is difficult if not impossible and thus ignore the minor fluctuations. This is excellent advice. The stock market should continue in bull fashion so stay fully invested at an allocation level you are comfortable with.

Now, some of us here have discussed over allocating to equities at buy points and cutting back our equity allocations at market highs. I have been doing this with very volatile semiconductor capital equipment stocks and, recently, an internet stock. This is market timing and we have made good money, but it is not a recommended strategy by Brinker or most other guru's.

Internet Stocks

Q2: One of the other things that makes me think something is up... too many people I know are buying and selling the Internet stocks, bragging about their 50%+ profits in a couple of weeks or months. Mostly these are people who weren't in the market 2 or 3 years ago. Probably a small percentage of the whole market, but it tells me there is rampant speculation out there, and that usually leads to a correction. What do you think?

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