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The Daily Dow LEXINGTON, Ky. (May 21): As virtually everyone expected, the Federal Reserve left interest rates alone at today's Open Market Committee meeting. While there weren't any surprises, no one particularly rejoiced at the news, either, and the Dow's winning streak of some nine straight sessions came to an end.
After yesterday's banner day for the Foolish Four, it's not surprising to see a little retreat today, and our main stock, Chevron, did just that, giving back about half of yesterday's big run-up. The only news for Chevron today was that Singapore Refining Co., partly owned by Caltex (which is a joint venture between Chevron and Texaco), launched a S$1.4 billion residue catalytic cracker plant today. That's obviously not the news causing Chevron to drop a buck and a half today. We'll have to write off today's drop as the second movement of the old shuffle "two steps forward, one step back." In other words, today's move doesn't mean anything of significance. Move on.
Kodak also slipped back today after a nice gain yesterday, but DuPont and 3M managed to tack on a little bit more in today's session.
No news on the other three Foolish Four stocks except for some fluctuation in the current Foolish Four list order. Yesterday DuPont rejoined the Foolish Four group as General Electric made a big move and saw its stock price eclipse that of DuPont. But today, GE slipped a bit, knocking DuPont right back into the #6 slot. If you're about to invest in the Foolish Four, check your numbers carefully because these two may well trade places a number of times in the near future.
This brings up an important point about the Dow Approach. It's not an exact science. The fact that an eighth of a point difference can mean one investor will buy GE one day and another investor will get DD on the next day shows you that there's always some slack in the process. Don't worry about it.
With this approach you're playing the long-term averages that the high-yield stocks will *generally* outperform the rest of the stocks. Whether you get DD or GE isn't all that crucial since no one can tell you with certainty which will perform better over the next 12 months.
The point of the strategy is to get invested as early as possible and stay invested as long as possible, letting time and the magic of compounding work for you. Set to, Fool!
Transmitted: 5/21/96
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THE FOOLISH FOUR MODEL (5/21/96) |
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