The Daily Dow
Tuesday, August 19, 1997
by Robert Sheard

LEXINGTON, KY. (Aug. 19, 1997) -- A number of you have received a mailing recently from Michael O'Higgins, the author of Beating the Dow. In the mailing, O'Higgins categorically tells readers not to use the Beating the Dow method right now because the market is over-valued. In fact, O'Higgins calls for a 57% collapse in the Dow Jones Industrial Average in order for the index to reach what he sees as fair value.

O'Higgins is writing a new book called Beating the Dow with Bonds, Treasury Bills and Stocks, a modification of his previous approach that uses a mechanical strategy to choose which of the three investment vehicles one should use for the coming year. His announcement claims an annualized return of 24.1% for the approach since December of 1968.

Before you panic and sell all your stocks, though, realize first that O'Higgins has been a consistent bear on stocks for several years now, and has been consistently wrong on such market predictions. I'm as interested as anyone to see exactly what his new system entails, but take his pronouncements about the Dow Approach for what they are -- short-term market calls. And his similar calls in the past have been poor.

As for the market's relative value today, O'Higgins may be absolutely spot on, but that's not an issue we try to take on in the Fool. (He might also be completely wrong. No one knows.) Even the best of the best market timers, though, have a hard time beating a simple stay-invested-in-stocks-always approach, so our philosophy is ever to remain fully invested in common stocks. In some periods, we'll lose to other investment classes, of course, but over the much longer term, we're confident that stocks remain the best asset class for capital appreciation.

For an analysis of the new capital gains tax rates and the Dow Approach, please read today's Foolish Workshop column. Fool on!

(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    -   1/16  40.44
GM   +2  1/8   63.13
CHV  +1  5/16  78.94
MMM  +1  1/4   93.00

            Day   Month    Year
        FOOL-4   +1.46%   3.58%   9.70%
        DJIA     +1.47%  -3.70%  22.79%
        S&P 500  +1.48%  -2.97%  25.01%
        NASDAQ   +1.99%   0.43%  23.99%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  153 Chevron       65.00     78.94    21.44%
   1/2/97  179 Gen. Motor    55.75     63.13    13.23%
   1/2/97  120 3M            83.00     93.00    12.05%
   1/2/97  479 AT&T          41.75     40.44    -3.14%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  153 Chevron     9945.00  12077.44  $2132.44
   1/2/97  179 Gen. Motor  9979.25  11299.38  $1320.13
   1/2/97  120 3M          9960.00  11160.00  $1200.00
   1/2/97  479 AT&T       19998.25  19369.56  -$628.69


                             CASH    $945.84
                            TOTAL  $54852.22