<THE FOOLISH FOUR>

Foolish Four Report
by Robert Sheard

LEXINGTON, KY. (May 20, 1998) -- One of the most Foolish investors/money managers/authors I know is not officially a Fool at all, but I'll claim him anyway. James O'Shaughnessy, if you don't know his work already, is the author of three books: Invest Like the Best, What Works on Wall Street, and How to Retire Rich. (You can order them through FoolMart, if you wish.)

All three books are terrific and I'm proud to have them on my shelves. Jim's research has the same goal as much of what we do in the Fool: to provide information the individual can use to beat the market consistently. His philosophy about life-long saving and staying fully invested mesh perfectly with the Foolish approaches we discuss daily. It's no surprise he's a long-time champion of the Dogs of the Dow.

But as big a fan as I am of Jim's, my two favorite pages in all of Jim's books are words that aren't really Jim's at all. In How to Retire Rich (on pages 139-40), Jim cuts and pastes a sequence of headlines from a gaggle of gooroos, all predicting the market's demise in recent decades. Jim parenthetically includes the date of the headline and the level on that day for the Dow Jones Industrial Average.

Take a look at a few entries:

"WILL THIS MAJOR SHAKE-UP IN AMERICA'S WEALTH WIPE OUT YOUR SAVINGS AND CRIPPLE YOUR FUTURE?"
(1954, DJIA: 330)

"NIXON RESIGNATION, RUNAWAY INFLATION AND THE CRISIS OF CONFIDENCE IN THE ECONOMY FOREVER CHANGE THE MARKET"
(1974, DJIA: 616)

"JOE GRANVILLE'S 'ABANDON ALL HOPE' MESSAGE SPARKS A GIANT SELL-OFF ON RECORD VOLUME"
(1981, DJIA: 875)

"STOCKS CRASH, DOES A DEPRESSION LOOM?"
(1987, DJIA: 1,738)

"IF THIS IS NOT A HIGH-VOLUME, CHURNING, DISTRIBUTIONAL, QUADRUPLE TOP, I'LL EAT MY CHARTS"
(1994, DJIA: 3,708)

"IF YOU'RE NOT PREPARED FOR THE BEAR, YOU RISK GETTING MAULED"
(1997, DJIA: 6,703)


By now, you've noticed that the number for the Dow gets progressively larger with each headline. And today, we're sitting more than 2,000 points higher than the final headline in the collection.

Every day I get asked whether I think the "market" is too high for an investor to add money today, and every day I look at this list of headlines (it's pinned on my wall) and realize that for long-term savers, it's never a bad time to invest. If you're focused on short-term returns, I have little to say that you'll be interested in, but if your investment timetable is a decade or two (or more), then today's market isn't a crucial factor for you. Get Jim's book and read the full collection for yourself. It's a great calming tool every time we're faced with yet another gooroo's doom-and-gloom prophecy.

Thanks, Jim, for a brilliantly Foolish reminder about the notion of predicting the markets and long-term investing. Fool on!

Current Dow Order | 1998 Dow Returns

[Robert Sheard is the author of the The Unemotional Investor (Simon & Schuster, 1998) available now at Amazon.com and your local bookseller.]

TODAY'S NUMBERS
Stock  Change   Last 
 -------------------- 
 UK   +   3/4   54.38 
 IP   +  13/16  52.88 
 MO   +   5/16  36.13 
 EK   +   7/16  70.69 
 
 
                  Foolish Four Returns 
                    Day         YTD 
         FOOL-4   +1.14%   2.29%  12.10% 
         DJIA     +1.29%   1.19%  15.97% 
         S&P 500  +0.86%   0.66%  15.32% 
         NASDAQ   -0.76%  -1.96%  16.65% 
  
     Rec'd   #  Security     In At       Now    Change 
  
  12/31/97  291 Union Carb    42.94     54.38    26.64% 
  12/31/97  289 Int'l Pape    43.13     52.88    22.61% 
  12/31/97  206 Eastman Ko    60.56     70.69    16.72% 
  12/31/97  276 Philip Mor    45.25     36.13   -20.17% 
  
  
     Rec'd   #  Security     In At     Value    Change 
  
  12/31/97  291 Union Carb 12494.81  15823.13  $3328.31 
  12/31/97  289 Int'l Pape 12463.13  15280.88  $2817.75 
  12/31/97  206 Eastman Ko 12475.88  14561.63  $2085.75 
  12/31/97  276 Philip Mor 12489.00   9970.50 -$2518.50 
  
  
                              CASH    $415.96 
                             TOTAL  $56052.09