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Author: dswhite One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 18386  
Subject: I'm confused about Rule Makers... Date: 11/23/1999 6:27 PM
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I'm happy to have a star beside my name, finally (yay!) but the fact is that I have *yet* to make my first non-IRA, non-index-fund investment. I'm trying to do my homework, so I'll understand whatever it is I put my money into. More index funds? Mechanical strategies? Rule Makers? I'll let you know when I finish researching. ;-)

Given my personality and novice status, I thought a good next step beyond my IRA's index fund would be to research and buy some RMs. The idea of buying big, strong companies that have the cash, pricing power, and authority to create virtual (or actual) monopolies sounds attractive. I like the idea of being able to buy and hold a company for a long time - maybe forever.

So I finished reading the RM/RB book, and started looking for those dominating companies that had the Rule Making crown. Coke, Microsoft, Pfizer all were glowingly recommended as top-drawer Rule Makin' companies - they seemed like good places to start.

But what's this I see? A single year hasn't even passed since RB/RM was published, and already the former Kings are looking like they have feet of clay?

- Coke has been the subject of several troubling TMF articles. TMFVerve recently gave it a rating of 33 - third tier!

- Pfizer has had its share of problems, resulting in a ranking of 39-40.

- Microsoft, though still looking strong, now faces probably its most difficult challenge since it broke into the market with DOS. Its future is at least uncertain.

Yes, I know that it's important to keep up with quarterly statements. And yes, I know that companies will have their ups and downs even if you do hold them for decades.

But somehow I was thinking that with a Rule Maker and its near-monopoly powers, the downs wouldn't be that low, and the general trend would be doggedly higher. And yet within a few months, a company like Coke, rated 54 in the RB/RM book, now is the subject of a possible "sell" consideration.

Was I mistaken about Rule Makers? Is Coke's volatility to be expected in a Rule Maker? Or has its dominance come to an end?

Or is the Rule Maker strategy not the "buy and hold and hold and hold" method I was hoping for?

Thanks to anyone who can clear up my confusion.
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