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The Daily Dow LEXINGTON, Ky. (June 11): Once again, there's a change in the current Dow stocks order. With General Electric's drop today, it rejoins the top ten yielding Dow stocks and Caterpillar's position on the list lasts only a day. These frequent switches are unusual for the Dow stocks, but with three or four stocks all having virtually identical yields, it's not surprising to see them alternate as each one's price fluctuates a bit.
Today's lower-than-expected wholesale inflation numbers sparked an early morning rally in bonds and stocks, but the excitement faded by day's end and the session closed with a modest third of a percent drop for the Blue Chip index.
The overall inflation rate at the wholesale level dropped a tenth of a percentage point in May and the "core" rate (which excludes food and energy components) remained flat. With the general Wall Street expectation that the recent string of monthly increases in inflation figures would continue, the relatively low number renews hopes that inflation is under control.
Tomorrow, the retail inflation figure comes out and we'll watch the process of everyone trying to out-guess the Fed all over again.
What's it mean for Fools? Nada, zip (no, not Iomega's Zip), zilch, bupkiss! Why? Because Fools aren't concerned with market or economic forecasting. Instead, we try to find solid companies that will hold up well, regardless of "the market." Does that mean we take our lumps when the market sells off? Of course. But it also means we're not stranded on the sidelines worrying about the fed or the next correction or when to jump back in the pool.
Ever since the Motley Fool opened, there has been a chorus of readers warning that we should get out of stocks because a crash is coming. And it may very well come tomorrow. No one, and I repeat, NO ONE knows for sure. In the meantime, the market is up over 50% in the last 18 months. Even if a crash came along and wiped out 30% of the market's value tomorrow, those investors in an index fund 18 months ago would still be up about 5% after the crash.
And the Foolish investors who consistently beat the market would be up even more. Yes, the market's sudden drops can be painful and make people panic. But looking strictly at long-term portfolio returns, those who stay in the market full-time will be ahead of those who have been sitting on the sidelines during the last 50% rise, waiting for a safe entry point.
The beauty of an approach like the Dow Approach is that you don't even have to follow things like wholesale and retail inflation numbers. That leaves you with time to finish writing the next great American novel, or getting those fingerings right on that Chopin etude, or working with your son or daughter on that backswing. Fool on!
Transmitted: 6/11/96
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THE FOOLISH FOUR MODEL (6/11/96) |
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