I trust the masochists that lurk in our vast readership got their financial jollies the last two days. Total index losses were nasty: Dow Industrials, 127; Dow Transports, 86; Dow Utilities, 3; Nasdaq, 35; Russell 2000, 5; American Stock Exchange, 6; and the S&P 500, 21. I sure am glad that everyone invests for the long-term these days, and that no one pays attention to these declines!

Don't believe it. Everyone who owns stock has an eye on the market, and these days the market drop is a greater topic of conversation at social gatherings than it was on the way up. As if the Japanese and Soviet economies aren't enough of a problem, we are forced to think about the President's Monday testimony regarding Oval Office gymnastics. The stock market ain't gonna like hearing about anything smacking of perjury or obstruction of justice.

If you haven't been tracking long term interest rates, you will be interested to hear that the yield on the 30 year Treasury Bond fell to 5.54%, which is the lowest since that issue was created. I hope that no world-wide recession is about to set in, but time will tell. All you can do is to continue practicing Stock Lent, with no margin, no high-flyers, and no chasing high P.E. stocks.

I still believe that we are in a bull market, but the market environment will be rocky to the end of the year. If any of your holdings make you nervous, consider selling one-half, regardless of whether you are winning or losing on the stock. This is definitely a time for digging fox-holes, and don't get suckered into buying the rallies. If anything, you should be making whatever sales you have in mind, into strength.

The greatest temptation these days is to want to buy stocks you like, that are finally becoming attractively priced. Resist the temptation. In a few more days, more likely than not, that good price isn't going to look so good. An old poker player who knew how to throw out hands with weak possibilities, used to tell me "Patience moves mountains." Be patient, and you most likely will be very glad you did. Stay tuned.

The Market Pro - August 14, 1998