Hello friends. The Market Pro is on vacation for two weeks, so Baywalk features Dean S. Tripodes as our guest commentator.

To quote the Market Pro, I hope all of you have followed Stock Lent on the way to today’s movement from an unofficial bear market to one where the latest question is just how serious is it? Thank goodness for reassuring comments from Treasury Secretary Rubin which appeared to help our nifty-thirty up from the basement levels where they were trespassing.

The financials seemed to hurt the Dow the most today, with J.P. Morgan and American Express being by far the greatest downers on the Dow. Only a slight gain by Intel helped stave off a more disturbing Nasdaq loss. In NYSE trading, decliners beat advancers by a 2-to-1 ratio, and unfortunately for unbelieving bulls, trading was considerable with nearly 880 million shares changing hands.

I like to say the market has two different players right now. The first are the pessimists, long time bears in waiting who couldn’t believe that bartenders were getting better returns by buying Coke and Gillette with unfounded P.E.s. The other side are the optimists, wearing Disneyland E-ticket glasses and are proud champions of the severe correction theory. With tremendous volatility, perhaps both sides will be temporarily confirmed.

On Thursday, Peter Lynch made an uncommon appearance on CNBC, and seemed perturbed at the frequent requests for messianic predictions of the Dow tomorrow. Quite appropriately, he denied deity status, and said that he could say the market would be at least 7,000-14,000 several years from now, but that nothing could be determined tomorrow. He cautioned investors by saying that he made most of his big money in stocks on the third year, not the third day.

The financial and banking industry took a hit, and among the more notably wounded were Morgan Stanley Dean Witter drubbed 5 3/8 to 53 5/8, J.P. Morgan dinged 6 ½ to 88 3/4, Citicorp lost 10 1/4 to 98 1/2, and Chase Manhattan Bank sunk 5 5/8 to 49 1/4. Mercy does not appear in sight, even though the banking executives have made “full disclosure” of Russian market exposure. Latin America is emerging as a potential trouble zone for U.S. financial and banking institutions, as Colombia announced a currency devaluation and Moody's Investors Services downgraded paper in Brazil while placing some of Argentina's long-term paper under review for a possible ratings cut. Ouch!

How do you play it? Do you have stocks with gas in them? If tax considerations aren’t terrifying, you could do worse than locking in today’s profits. A long Labor Day weekend isn’t going to stoke up market confidence. Dislike selling off the top? Sure, you’ve lost 10% of the cream, but are you ready for the ride down? Ask the Internet stock owners how they feel about that roller coaster. One rule for selling good stocks. Keep that money dedicated for that blue-chip. Sure, you might be selling Dell, Microsoft, Lucent, Cisco, Intel and other peer groups to lock in profits. But you can be sure that long term they will be the stocks to own over the next decade. Don’t use the proceeds to buy other investments or remodel the house. When you sell Microsoft and Intel, make sure that money is available to go back in when you are comfortable with market conditions. If you’re wrong, and they shoot up 15 points before the market stabilizes, then consider that "premature selling" as insurance. 15 points short term won’t break you on a hundred dollar stock. A fifty-percent gutting in a potential global recession will give you great cause for caution. Stock owners — beware.

Dean S. Tripodes - September 4, 1998