The Daily Dow
Wednesday, June 18, 1997
by Randy Befumo (TMF Templr)

LEXINGTON, KY. (June 18, 1997) -- While I was on vacation last week, a number of readers posted queries in our message folder about Michael O'Higgins's bearish pronouncements on the market in general and Beating the Dow in particular.

I don't know if he's actually come out bearish again or whether this is a rehash of some comments he made quite some time ago, but my response remains the same. Ignore his comments; read his book.

Even though O'Higgins wrote the book which popularized the Dow Approach (Beating the Dow, 1991), he's also a full-time money manager who uses a number of strategies, among them a market-timing strategy where he gets out of the market for part of the year.

To give you some historical context, O'Higgins made similar bearish pronouncements at various times during the past two years. I'll point you to the returns on the Dow for evidence of how good such predictions were.

Don't get me wrong; I'm not denigrating Michael O'Higgins at all. I think his book is wonderful and it launched my own investing career. But he should stick to the ideas he explained in the book. His efforts at market timing over the last three years have undoubtedly cost him (and his clients) considerable profits they otherwise would have enjoyed by following his simple approach.

With the proposed changes in the tax laws coming this summer, staying fully invested and racking up long-term gains makes even more sense than trying to time the market (a completely futile plan in my view) and paying the short-term capital gains taxes such an approach incurs.

So the fact that O'Higgins has been bearish on the approach doesn't dissuade me from recommending it whole-heartedly. I don't have a short-term outlook like his market-timing forecasts must. That affords me the luxury of ignoring all such forecasts in favor of a much longer-term perspective.

He may very well be right that the market is overvalued today, but that's not what interests us primarily. Stay Foolish; don't market time.

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. ________________________________

Stock  Change   Last
--------------------
T    -   3/8   37.50
GM   -   1/4   56.75
CHV  -1  7/8   74.25
MMM  -   1/8   99.88

               Day   Month    Year
        FOOL-4   -1.00%   3.71%   4.15%
        DJIA     -0.54%   5.29%  19.70%
        S&P 500  -0.60%   4.81%  20.02%
        NASDAQ   -0.74%   2.29%  10.95%

     Rec'd   #  Security     In At       Now    Change
   1/2/97  120 3M            83.00     99.88    20.33%
   1/2/97  153 Chevron       65.00     74.25    14.23%
   1/2/97  179 Gen. Motor    55.75     56.75     1.79%
   1/2/97  479 AT&T          41.75     37.50   -10.18%


     Rec'd   #  Security     In At     Value    Change
   1/2/97  120 3M          9960.00  11985.00  $2025.00
   1/2/97  153 Chevron     9945.00  11360.25  $1415.25
   1/2/97  179 Gen. Motor  9979.25  10158.25   $179.00
   1/2/97  479 AT&T       19998.25  17962.50 -$2035.75


                             CASH    $609.53
                            TOTAL  $52075.53