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Top 852. Jul 13, 2000 5:16 PM

» Kirk - Funds in cash.

Funds in cash...

I owned Vanguard Windsor with my 401K dollars back in 1987. Along with Brinker, they sold at the bottom and I was REALLY pissed! It was then that I learned to NOT TRUST mutual funds and I started to learn for myself. It was "only" a $10K hit back then, but can you imagine how much that $10K would be worth Today that they lost due to underperformance? DJIA 1800 to DJIA 11,000 roughly 6 times BEFORE you add in dividends. Probably cost me $65,000 in today's dollars as I wanted to be fully invested with those dollars.

I'll tell ya, it was NEWS to me that my investment dollars could be played around with by a fund manager to that extent. Of course, this tells why I am so critical of those that sold the 1987 correction as I lost much money when one fund I worked hard at funding did so. I wrote many NASTY letters to upper management at HWP and they eventually got us better mutual funds for our 401K and I got a letter back asking if I was pleased with the new choices. (I've never been shy about making my opinion known)

-- posted by Kirk

Top 853. Jul 13, 2000 6:28 PM

» Rande - Mark,

Mark,

Evidently you haven't taken your guru's advice to "educate yourself." Now, this is going to seem harsh -- but it seems what you don't know about finance and investment theory could probably fill the Library of Congress. Furthering the risk of coming across as some kind of hooty-tooty, let me also suggest that you don't need to do graduate work in finance and investment to be a successful investor (in fact, some of the wealthiest people in the world never even went to college or dropped out midstream), but a little study never hurt. You might want to start by picking up a copy of "Capital Ideas," by Peter L. Bernstein (check out Kirk's reading list). Here's some excerpts on Fama:

The man who went furthest to take Samuelson's ideas into richer territory was Eugene Fama. Fama wanted to consolidate what was known about the behavior of stock prices into a comprehensive theory tht would explain why prices appear to fluctuate randomly.

Fama went to Tufts University...[and] was elected three times to the Society of Scholars, which was made up of the two top students in the sophomore, junior and senior classes, and in his senior year he won the annual award as the school's outstanding student-athlete.

In 1964, after earning his doctorate at Chicago [Univ. of Chicago], Fama was invited to join the faculty as assistant professor of finance. At the time, Chicago offered little on the theory of financial markets or portfolio composition. Fama also found that few of the professors even knew how to use a computer. Standard courses on accounting, corporate finance, and security valuation made up most of the financial curriculum. These courses offered no challenge to Fama, so he decided to teach the graduate school's first course on the theories of Harry Markowitz. Despite the innovative character of Markowitz's writings, and despite his association with Chicago, his work was virtually unknown when Fama first brought it to the attention of the finance department and its students.

With a bull market that was now fifteen years old, the faculties of both the business school and the economics department were showing heightened interest in the behavior of the stock market. Fama found the atmosphere stimulating (the dean of the business school at the time was George Shulz, a member of [Paul] Samuelson's first doctoral group at MIT in 1941, and a future holder of three cabinet posts, including Secretary of State under Ronald Reagan) and he co-authored several articles with Chicago colleagues during the 1960s.

In January 1965, the "Journal of Business" published Fama's article, "The Behavior of Stock Market Prices." Seventy pages long, it comprised his entire Ph.D. thesis. Fama reviewed the available literature on stock market behavior, conducted his own tests of the random movement of stock prices, proposed his own theories on the matter, and joined those who had concluded that stock prices are not predictable. Nicholas Molodovsky, then editor of the "Financial Analysts Journal," considered the article so important that he invited Fama to prepare an abridged and less technical version, so that his evidence and arguments could be brought to the attention of investment professionals. This simplified version, "Random Walks in Stock Market Prices," appeared in the "Financial Analysts Journal nine months after the full version had appeard in the "Journal of Business." Even more remarkable, "Institutional Investor" reprinted the article in April 1968.
_____________________

Could go on much further, but suffice it to say that Fama is the first to coin the phrase "Random Walk" and "Efficient Market" (what Samuelson summed up as "No easy pickings"). He is a towering genius and legendery figure in the field of finance and market theory. His work (including his collaboration with partner French), continues to stand as among the most respected and ground-breaking of them all. Nothing compared to the "instant genius" of today, born of the "everyone's a guru" bull market of the 90s, but not too shabby nonetheless. Oh yeah, he isn't selling anything either (you know, like air time or newsletters).

-- posted by Rande

Top 854. Jul 13, 2000 7:32 PM

» Marty_H - Re Asset allocation over time

Thanks Rande and Kirk-

For the input on changing one's allocation over time. Let me know if I "got" what Rande said about munis:

Late in the career, as I go "risk averse" I should start sticking my taxable investment money into (tax free) munis and use that money as a cushion to bridge any market downturns during retirement, thereby not selling beaten down equities.

Thanks,

Marty

-- posted by Marty_H

Top 855. Jul 13, 2000 8:00 PM

» Rande - Marty,

Marty,

A laddered portfolio of fixed income investments can cushion the ups and downs of the stock market in a diversified portfolio. The use of tax-exempt munis in the taxable accounts would depend on your tax bracket. It's not about how little tax you pay, after all -- it's about maximizing overall after-tax return.

-- posted by Rande

Top 856. Jul 13, 2000 10:42 PM

» Mark_J - Rande, if Fama recommends riding out a bear market, then I'll l

Rande, if Fama recommends riding out a bear market, then I'll let him be your guru. That's just doesn't interest me in the slightest.

-- posted by Mark_J

Top 857. Jul 13, 2000 10:45 PM

» Mark_J - Kirk, re:

Kirk, re: Foster Freeze. I recall that he receive a severe tongue lashing on the weekend radio program in 1998. Here's the difference... Back then, the Federal Reserve was increasing the money supply, reducing interest rates. Which, as some of us know, leads to economic expansion.

-- posted by Mark_J

Top 858. Jul 14, 2000 5:38 AM

» Rande - June PPI numbers are in:

June PPI numbers are in:

PPI overall +0.6% (+0.6% expected)
PPI core DOWN -0.1% (+0.1% expected)

HOW SWEET IT IS!

-- posted by Rande

Top 859. Jul 14, 2000 5:42 AM

» Rande - June retail sales up 0.

June retail sales up 0.5% (0.3% expected). Combined with the benign core PPI number, markets should be happy.

-- posted by Rande

Top 860. Jul 14, 2000 5:54 AM

» Kirk - Good numbers indeed.

Good numbers indeed.
I wonder where Roger is to help us interpret them? You know, tell us to sell into strength before the minibull turns back into a bear. Where was it he was so sure we'd be right about now, NASDAQ 2300 or something?

-- posted by Kirk