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Here's to a happy new year for everyone!
What's with Larry for 2004?

I am basing my personal investing decisions on continued upward movement of the market for at least six months.

During the last two months of 2003, there was a move out of tech into cyclicals and stables. This caused the techs to go down or remain flat.
Now in January, indications are that funds (both meanings) are moving back into the techs, and most of the Fab 15 have resumed their upward movement.

I would not be surprised if the Nasdaq hits 2500 in the second half of the year. The expected pattern would look something like -- from here up to 2200, then down to 2100, up to 2300, down to 2200, up to 2400 ... well you get the picture. Two steps forward, one step back -- very much like 2003.

If this happens, there will be two routes to healthy portfolio increases:
First, and most importantly, buy and hold shares of fast-growing companies with great fundamentals (see China Connection and Fab 15 boards).
Second, if you have the stomach for it, watch the oscillating technical indicators so you can buy low and sell high during the pattern swings.

As I have said before, in my big IRA account I only do LTBH, exchanging at most one stock a month -- usually due to bad news. In my smaller trading account, I actively buy low and sell high -- and lately things have been working well there.

Sadly, any such optimistic talk like this must be tempered by a warning: that if a bad terrorism event happens, all bets are off. The WTC catastrophe of 9/11/01 could pale in comparison to a sporting event catastophe.

But we cannot base our investing behaviour on possibilities, but rather, on known facts about companies and about the market.

Here is something to watch out for ... a guideline -- a benchmark for safe and sane investing:

Statistically, the Nasdaq gets into troubled waters when it grows to be more than 30% of the Dow. Right now, it is almost exactly 20% (19.828%) of the DJIA based on today's close.

When the Nasdaq was at its height of 5132.52 on 3/10/00, it was at 50.26% of the DJIA's 10211.77. Millions of investors would be much happier today if it had stopped then at 30% -- or 3063.53

So, what does that mean for 2004?
First, the Nasdaq WILL outpace the DJIA,... (In Nov-Dec, DJIA outpaced the Nasdaq).

Second, ... but much less than in the crazy days of 1999-2000.

Third, my guess is that if the Nas hits 2500, the DJIA will be at 11500-12000, which is around a 21-22% relationship. Very healthy!

Fourth, my SWAG guess is that those figures will be reached in the third quarter (July-Aug-Sept).

And Fifth, that if the Nas/Dow relationship nears 25% (3000/12000), head for the hills, consider bailing out of techs, and moving into cyclicals and stables for sure! Still, more about that later if the time approaches. By that time, 30% might be reasonable due to exceptional earnings. (Just not 50%)

Well, there it is in black and white. And printable for firewood or dartboards later. It's what I'm basing my investment decisions on, not what you should.

I'll lurk around a little closer if you want to discuss. (Also posted on the 'Fab 15 & Friends' board.)

Here's to a great 2004!

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