Declines still outpace advances, and there is no big reason for stocks to go up. Now the stock market gets very selective, as there is no general enthusiasm to lift all boats. Yes, the tide is going out, and by golly, there are quite a few ladies and gents who weren't wearing bathing suits after all! Ah, the joys of day trading on the Internet! The thrill of owning Internet stocks!

This is a time when new investors learn the cold fact - a stock is only worth what you can sell it for. And should they be adamant that "this stock just CAN'T go any lower", they are setting themselves up for an unpleasant experience. That's how they turn lambs into lamb chops. Many of these neophytes didn't realize they were buying into the greater fool theory, only to find that they were the greatest fool with no one willing to pay a higher price than they paid for their stock.

The general market spanking is not through, because when these high-flying Technology issues that were selling for 100 times trailing earnings come down 20%, 80 times trailing earnings is still ridiculous. They could still fall another 50% in order to be selling for a more reasonable multiple of earnings. And the Internet stocks, why they are a little disaster story all of their own, coming down steadily. Hey, is somebody figuring out that tulip bulbs are only flower bulbs? Wow! These greenhorns are really smart! And maybe they are just starting to figure out that in the game of musical chairs, there is no chair for the last player.

For the rest of the sane population, and I hope that includes us, we should bide our time. Resist the temptation to get in too soon, just because a stock you always wanted looks reasonably priced for a change. If you wait a little longer, that stock is likely to get a lot more reasonable. Yes, yes, yes! We can say it again in big letters - CASH IS KING! Stay tuned.

The Market Pro - February 10, 1999

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