I'm ba-ack!

Move over Louis Rukeyser! Whenever he takes a vacation, the market falls, and he returns clucking about how the market can't get along without him. Well I was on vacation and the market took gas beyond Rukeyserian proportions. To atone for my guilt, I returned a little early to give my faithful troops a little guidance.

First, let's chuckle at the thought of the short-term performance driven portfolio managers, especially the young ones. The little rascals were probably in college during the last bear market, and no doubt many of these bright boys and girls have been caught with their pants down, and it's not a pretty sight.

Market pro's know that rocky times come with the territory, so they try to be prepared. We have often discussed the virtue of caution, especially the avoidance of margin, and high flyers. If you also heeded our advice of accumulating cash and practicing "Stock Lent," you're not in too bad a shape.

Overall, I don't expect too much positive action from the market through October. I say overall, because there will always be certain stocks that have unanticipated good results and are reasonably priced, and will subsequently have their prices go up. However, I think most of the stocks will be subject to the negative pressures of softer earnings and the Asian effect, and this will spook many investors into refraining from putting new money into the market, and will spur others to take profits.

September and October have been notorious for market disasters, and this year may be no different. In spite of this negative talk, you must not lose sight of the future, when the market resumes it's upward trend. It wouldn't hurt for you to start preparing your stock buying shopping list, so you can be ready when the market looks like it is resuming its upward climb.

Your shopping list should include those stocks with good relative strength. There are a number of investment sources that provide this information, but you can make your own relative strength assessments based on your own observations. It won't be as accurate as computer models, but it should be good enough to make reasonable decisions.

For example, the Dow was down almost 429 points from Thursday, July 30 through Friday August 7; that is a drop of approximately 4.7% (see what happens when I go on vacation?). One of the stocks I watch is Atlantic Richfield (ARC on the NYSE). It was down 2 9/16 at 67 5/16, or a loss of 3.6%. Although that loss is slightly better than the Dow's, it's nothing to write home about either. In fact, it's kind of bad as the oils have already been beat up for quite a while now. I own Roberts Pharmaceuticals (RPC on the ASE) which was up 1 at 21 15/16, or a gain of over 4.7%. In my book, that's great relative strength, and that's the stuff good shopping lists are made of. Stay tuned.

The Market Pro - August 7, 1998