On the positive side, we have a favorable domestic economy, low inflation, low interest rates, and good corporate earnings. On the negative side, we have shaky third world economies, a weak Japan, and most important in our view - many fully valued stocks.

In this environment, a wise approach is primarily to hold your positions unless you are uncomfortable with that approach, in which case you may wish to either sell one-half of the stock positions that trouble you, or simply eliminate such stocks from your portfolio.

There is always the case for buying special situations, for which you have done all the necessary research, and feel strongly about the buy argument. There are a number of stocks that have positive dynamics going for them, which are not recognized by the market. We will be reviewing some of them in future articles.

Barring buying into these somewhat speculative issues, you may wish to wait to buy the highest grade stocks should the market weaken further from here. I particularly favor AT&T, Chase Manhattan Bank, Lucent Technologies, and Pfizer. And if you have a little more of a sporting instinct, there is always something good to say about Citigroup and Philip Morris.

If nothing interests you, there is nothing wrong with holding more cash until the uncertainty decreases. Cash in your account bugs the brokers, but it is a powerful tool on your behalf. Successful generals in the military throughout history have always appreciated the strategic value of keeping forces in reserve, even though there are always tempting opportunities to commit them to battle. Well you are in an investment battle of your own, and you could do worse than build up your cash reserves. Let the guys who have no cash, question why you want to have it. Tell them I said CASH IS KING! Stay tuned.

The Market Pro - February 17, 1999