If last Friday was a real Short crusher, today they brought out the old steam-roller and rolled over the crushed shorts to make the world's biggest sewer cover. Guinness, where are you when we need you most?

You've heard of not standing in front of the proverbial freight train, well today was it. As you know, both the Dow Industrials and the S&P 500 closed at new all-time highs, and the Nasdaq closed only 27 points below its all-time high. This virtual straight up move since early October is historical in nature, and demonstrates so clearly that when the Fed eases money, the market gets its favorite high-octane fuel.

As you might expect, I am very disturbed with the rocketing Internet stocks. I guess by this time, only people in intensive care don't know and wouldn't care about today's action. But I am driven to say it regardless. Yahoo was up 30 7/16 at 221 7/16, Amazon was up 37 3/8 at 218, and E Bay was up a tidy 46 at 193. There are a lot of stocks that don't go up 46 points in 46 years, let alone in 1 day. If I heard right, Amazon's market capitalization is now greater than that of Sears!

Think of that madness for a minute. Think of Sears, with all their stores, and multi-billions in business, big profits, and a name that has endured in American marketing annals. Then there's Amazon, with great promise to be sure, but you couldn't buy a hot dog with their profits to date. Because there aren't any, and won't be any for a while. Cancel my hot dog order - we can't pay for it.

As a well-known and highly respected fund manager, who is managing many billions himself, said in dismay today regarding the activity in the Internet stocks - "It's absolutely weird. It's absolutely insane. It's the greater fool theory all over again." I couldn't agree more. As that famous stock market patriot once said - "Give me tulips or give me death." That's what makes the market great, folks.

That said, how do we make money without too much risk? That's a tough qualifier. If you are essentially fully invested, it's relatively simple - you hold, and make new investments only with proceeds from sales. If you are under invested, you can only commit new funds over time, such as every month invest 10% of the new funds you want to invest. I would still prefer waiting for a correction between now and year-end before putting new money in this market. I don't trust it, and I think it's very dangerous.

You never stop making adjustments to your market approach; there are always new experiences to help you refine your strategy. I just learned one the hard way. On Friday, November 13, Novell closed at 15 1/16. Over the weekend, the story came out that they had a new business arrangement with Cisco along the same lines as the recent one with Lucent. I decided to buy a large number of shares first thing Monday morning. On Monday morning, the opening indications were 15 5/8 bid, 15 11/16 ask; I had hoped to pay 15 1/8 - 15 1/4. I didn't buy because I already have a sizeable position, and I didn't want the risk of a drop after the big run-up the stock has had. Novell closed at 18 today.

My second experience was nastier. After the close on Friday, November 20, an Internet stock analyst told of a recent new issue that was selling below it's IPO price and that was a rapidly growing seller of computers and software, and hadn't participated in the big Internet move. I researched the stock, found it had substantial cash, and booming sales. It closed Friday at 14 1/4 bid, 14 3/8 asked, and I decided to buy a substantial amount first thing today. I recognized the risk, but thought I could handle it, and would take a quick loss if it didn't work out. Well, that wasn't the problem. The stock opened in the 18's, and was back in the 16's five minutes after the market opened. I decided not to buy it, as I was looking to pay in the 14's. Well the stock. Cyberian Outpost, closed at 25.

If there is any lesson here, it is this. If you are trying to time a substantial buy, and the price gets away from you, invest a modest portion of your original planned investment. In retrospect, and with the 20-20 vision that comes with it, I should have invested 20% to 25% of my original plan. In that way I could still participate in what I believed to be a good idea, and reduce my risk very substantially.

In the midst of all this euphoria, remember that just as the market turned on a dime on the way up, it can do it on the way down. I don't look for a return to early October levels, but we could easily retrace one-half of that gain. So be patient, and with a little luck you may be able to buy some of those stocks you want in your portfolio. I know that I'm looking forward to doing the same thing before December is over. I know it's tough to be holding cash when the market is hot, but you can be stuck with a lot worse than cash. Stay tuned.

The Market Pro - November 23, 1998