Today was a pretty good day. For a while, it seemed as though it would be even better, but a Fed official was interviewed, and she spoke about the robust economy. Of course, this spooked the market, which had visions of a hike in rates when the Fed meets next. Anyway, it was good to see the bonds go up, as the 30 year Treasury Bond yield fell to 5.66%; the all time low yield for this instrument was 5.59% reached last Monday, June 15. What made this day pretty good, was the strength in the Russell 2000 which was up over 3 points at 441. As this index is somewhat of a proxy for second and third tier stocks, it meant a good one-day performance among this group which has never really participated in the Great Bull Market.

If you own this type of stock, and many do, you know what I mean. For those of you who are just waking up out of a multi-year coma, let me tell you that this bull market has been a blue-chip show. This is what has been killing the old pros. For the rookies who have been making big money buying names they know, like Cisco, Coca Cola, Gillette, Microsoft, etc., well, this market has been just neat. They've been making 30-40% a year, and they just know that old pros like us who know so damn much about the market, must be making a fortune.

The problem veteran investors have had is two-fold. First, the market valuation measurements have had dangerously high readings for some years now, so to them that means the market has been too expensive, so far as the blue-chips go. Wrong again ex-lax. If you are knowledgeable, that has made you wary and you probably have avoided quality, but overpriced issues. But for the greenhorn, it's different. Not having seen bear markets, they know no fear. So they have been buying and buying, thinking "Gee, this is great! How long has this been going on? It's so easy! Sure it is, jerko. Just keeping buying with those rose-colored glasses on, and you'll get yours when the time is right.

The second problem for veteran investors is that with the market being so high, they scour the stock landscape for undiscovered gems that offer good value. And because they're veterans, they think they're pretty cute when it comes to finding good stocks. News flash: they have been in these stocks for years, with little in the way of results. Some news. Stock folk-lore also has it that these secondary issues are the last to join in a Bull market. So the vets have bought and held waiting for the big move. Surprise! No move yet. Just to show you how contagious this warped thinking is, I have been infected myself. I will be reviewing some of these hidden beauties over the weeks ahead, and as always, you'll know if I own them. Who knows? Maybe they will take off. Even old guys can get blessed by the Good Stock Fairy. Stay tuned.

The Market Pro - June 22, 1998