Well, well, well. So we had a rally today. That's nice, and I like it, but I'm not convinced that we're out of the woods yet. And you better agree with me if you know what's good for you.

Tuesday's market was very nasty, and although the Dow did cut it's losses by more than one-half, the volume was not enormous. Large, but not enormous enough to mean that the last bull has thrown in the towel. And at the day's worst, there were a lot of attractive prices, but they were not stupidly attractive. When the boys are selling a dollar for 75 cents, that's when you have capitulation and the worst is not only behind you, but the market is ready to go up with some very impressive gains.

If you don't think the troops are scared, guess again. Both the ladies and the gents put on the equivalent of adult diapers when they piled into the Utilities big-time. The Dow Jones Utility Average, after being down 1.95 on Tuesday at 274.72, was up today a whopping 6.09 at 280.81! This is one of the biggest one-day gains in the history of this index.

What to do. Well, if you are a loyal reader of this column, you have been practicing Stock Lent with no margin, no high-flyers, and no chasing high P.E. stocks. Systematic, constant dollar monthly investments are always OK, and in fact are encouraged in falling markets when you can buy more for your money. But for the rest of us, cash is king. I still expect the market to administer more spankings in the days ahead, and I don't think September and October will be too much fun. In fact, you may never forget them.

For those of you who just have to invest because you have too much money and don't know what to do with it (I really should get to know you better), and if you have too many brains to buy gold stocks, you may want to look at electric utilities and oils. Even with deregulation of electric utilities, 80% of a monopoly is better than none. As we have seen in California, it's not that easy for competition to come in, aside from industrial cherry-pickers. Even then, the local utilities are not going to play dead; they'll fight like hell to keep their business. Also, they won't be forced to buy high-cost production like geothermal, solar, and maybe raccoon gas power.

My favorite utilities are ones I own. If they weren't my favorites, why the hell would I own them? We're talking about American Electric Power (AEP), Cinergy (CIN), DQE (DQE), and Southern Company (SO).

I like the oils for several reasons. First, it's a finite resource. Second, they have been beat-up, so you're not paying someone else's profit. Third, the Asian problem won't last forever, and when it's over, they'll be back buying oil with a vengeance. My favorite is USX Marathon (MRO). On July 23, they reported their second quarter earnings, which were flat at an adjusted $.56 vs. $.55. The bad news is oil prices are lower. The good news is oil production is up 22%, and the integration of Ashland's refining, marketing and transportation into Marathon's operation is going very well. (Ashland is an oil refining and marketing company that has a joint venture with Marathon.)

A final Marathon dog biscuit for you is that they not only have fine exploratory and development prospects, but they are acquiring Tarragon Oil (Canadian) which will add 20% to their world-wide reserves, and 2.6 million acres of undeveloped leasehold! Wait - here's one last dog biscuit for you. A highly respected Wall Street analyst recently reduced his 1998 earnings forecast for leading domestic oil companies which added further to their weak prices. In my book, that makes Marathon an even greater bargain. It's had a 52 week range of 29 - 40 ½. Today it opened at 31, went to a high of 31 ½, then went to a low of 29 15/16, and closed at 30 1/8 down 5/8.

I'm not saying I'll buy this stock tomorrow, because I won't. I'll let the market take the gas I expect is in it's future, along with great stories of OPEC members cheating on their quotas. THEN I'm in. As always, if you lose money it was your idea, and of course if you make money, you read it here. Stay tuned.

The Market Pro - August 12, 1998