Rational Investing: Rely on homework, not popular opinion

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How go the markets? The focus is going to be on the elections, so don't expect the markets to show much conviction one way or another unless one of the candidates takes a sustainable, multi-point lead in the race for the presidency. |ret||ret||tab|

The market will then tell us what it thinks will happen sector by sector to the economy, although the initial knee-jerk reaction may be counter to the longer-term trend.|ret||ret||tab|

Don't expect Federal Reserve Chairman Alan Greenspan to upset the political scene by raising interest rates, at least not until after the election. |ret||ret||tab|

But do expect market participants, especially bond investors, to begin showing concern about the abnormally high rate of growth in the money supply, a continuing spillover from injecting Y2K liquidity into the system.|ret||ret||tab|

The October 1987 mini-crash in the markets (in retrospect a great buying opportunity) has planted in many investors minds the belief that this the belief that this particular month is the worst for performance. |ret||ret||tab|

Not so. September has historically proven that it holds that title. But does history mean that much these days? |ret||ret||tab|

Here's food for thought: The last quarter of the year has been the best in recent times, but everyone knows that. When everyone knows something it is seldom correct. |ret||ret||tab|

Don't bet heavily on the wisdom of the gurus of Wall Street. Keep doing your homework and select issues with real earnings selling at price earnings ratios that are historically low. (I know, I repeat this mantra almost every column, but it works.) |ret||ret||tab|

A few random thoughts, some of which tangentially relate to rational investing (but most of which don't) and are perhaps worth musing over.|ret||ret||tab|

Things I wonder if I'll ever hear:|ret||ret||tab|

From a coach or manager of any sports team:|ret||ret||tab|

"Nah, we're looking past the next couple of games, then we're gonna take 'em two or three at a time."|ret||ret||tab|

"What I like about him is that he doesn't play within himself."|ret||ret||tab|

By any candidate for elected office:|ret||ret||tab|

"My opponent has some really great ideas, and there are no buts' or howevers' about them."|ret||ret||tab|

Stated by Greenspan during Congressional testimony:|ret||ret||tab|

"Inflation is absolutely dead."|ret||ret||tab|

A farewell speech (of less than five minutes) in which Bill Clinton says:|ret||ret||tab|

"I can tell you exactly what the meaning of the word is' is."|ret||ret||tab|

Tiger Woods requesting:|ret||ret||tab|

"Can I have a mulligan on that shot?"|ret||ret||tab|

Dulcet-voiced John McEnroe acknowledging:|ret||ret||tab|

"You were absolutely right on that line call, sir."|ret||ret||tab|

Either of the glamour boys on CNBC's squawk box exclaiming:|ret||ret||tab|

"That's it. No more touting only high tech stuff. I'm going to start talking about companies with real earnings."|ret||ret||tab|

From Al Sharpton:|ret||ret||tab|

"I'm staying home and minding my own business."|ret||ret||tab|

Questions I asked myself:|ret||ret||tab|

"Are Bush and Gore really the best the two parties have to offer?"|ret||ret||tab|

"Why am I not considered a member of the working class, in spite of the fact that I put in 50 to 60 hours a week at my job?"|ret||ret||tab|

"Have I learned the difference between what I want to talk about and what others prefer to hear?"|ret||ret||tab|

That last comment was prompted by the unexpected (by me) results of a recent survey we conducted in which we asked clients and associates to choose, from a list of 13 topics, the five they would be most interested in having addressed in a seminar or workshop. |ret||ret||tab|

My favorite presentation, "Rational Investing in Irrational Markets," finished tied for next-to-last place. |ret||ret||tab|

Oh, well. (For a list of the selected topics and when we are available to present them in the greater Springfield area, contact me through the SBJ or by e-mail.) |ret||ret||tab|

|bold_on|(Clark Davis is a 30-year investment veteran and CEO of Saint Louis Investment Advisors, a specialized money management company. Questions or comments can be directed to him by mail via The Springfield Business Journal, 313 Park Central West, 65803 or by e-mail at sbj@sbj.net.)[[In-content Ad]]