The market had a big last two days, with the Dow up 212, the Nasdaq up 71, and the Russell 2000 up over 9 points. With no news about Japan's ineptness at solving their problems, with not much of a threat China will devalue their currency while the President is visiting, and with no Fed member dreaming out loud with reporters, the market was free to go up.

The market is still dangerous and can turn on a dime. A conservative stance is still called for, until the future of 1998 earnings becomes clearer. Time flies, and we only have a little over two weeks to go until earnings season. It should then be obvious if second quarter earnings have the right stuff to propell this market forward.

The market often acts in a strange fashion, and particularly so with individual stocks. A stock may go up on bad news and down on good news, and that drives investors mad. Sure, we know that traders might have expected even worse news on the first stock, and the good news may have been anticipated in the stock price. In the latter case, traders may think that since there probably won't be any more good news for a while, the stock will have nothing to keep pushing it up. No doubt this is one driver of the notion "Buy on the rumor, sell on the fact."

Further, you don't always learn when a brokerage house may put out a buy or sell recommendation. And then even if you do learn of it, how about the stock price action that results from brokers knowing of such recommendations before they're made public? I guess we can deal with these factors, but one of the toughest is when momentum players hop on or off a stock.

This was evident in an interesting reinsurance stock I've been following, which is Everest Reinsurance (RE). This is an interesting stock for several reasons. Their first quarter ended 3/31/98 earnings were $.78 vs. $.68 in Q1 of 1997, which is a 15.5% increase. They earned $2.22 in 1996 and $3.07 in 1997, so maybe they'll make $3.40 - $3.50 this year. Your guess is as good as anyone else's. Anyway, the stock has had a 52 week range of 33 - 45 1/4, and closed Friday at 36 1/2, unchanged.

Before the market opened on Monday, Berkshire Hathaway's planned acquisition of General Reinsurance was announced. RE then opens on a block of 57,400 at 39, up 2 1/2. It gives a dollar back and closes at 38, up 1 1/2 on 657, 000 shares. On Tuesday it gets the dollar back and closes at 39. Today, with the market hot as hell, it closes at 37 13/16, down 1 3/16 on 357,000 shares. I'm sure today's action was particularly maddening to shareholders, as the stock opened at 39, went to a high of 40 1/4, and then went to a low of 37 3/4 and closed just 1/16 higher. What gives? Answer: Who the hell knows? I guess sellers came in when the stock stopped going up, and maybe they just bought it for a quick trade following the Berkshire announcement.

On top of it all, financials are supposed to be all the rage, along with drug and retailing stocks. Also, there aren't too many good reinsurance stocks around, if the industry now finds itself in a consolidation phase. This is why you have to invest for the longer term, and not pay too much attention to the daily price action. That way you might not get heart trouble by the time you're rich, and you can enjoy some of the money you made reading Stock Smarts. Stay Tuned.

The Market Pro - June 24, 1998