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CARRET & COMPANY'S PHIL CARRET
(continued from preceding page)
The stock market decline may only be half over.
"On balance, the near war in the Persian Gulf is a bearish influence on the economy and the stock market. We were already in the early stages of a recession. And the Iraqi adventure can only make it worse. Perhaps, the stock market is only halfway down from its 3,000 peak for the future bear market bottom of the Dow."
The job of a security analyst.
"What should a contrarian do whose policy is to invest in attractive securities regardless of his own or anyone else's forecast of future market movements?"
"The answer, in my judgement, is simple. The job of a security analyst or a money manager is to determine relative values. If Security X appears to be relatively cheaper by a wide margin than Security Y, the holder of Y should sell it and buy X."
"This is far more difficult than it may at first appear. The suggested wide margin is insurance against the errors of judgement of which all of us are guilty much of the time."
More fortunes are made by sitting on your assets....
"There is also another alternative: Don't do anything. More fortunes are made by sitting on good securities for years at a time than by active trading."
"I well remember a luncheon with a friend who was a limited partner in a stock exchange firm. The third member of the group was an active partner. They had just been to the funeral of a mutual friend whom they regarded highly. He had been a floor trader for his own account on the stock exchange and had made and lost several fortunes."
"Whenever he felt confused about the market, it was his practice to board the Queen Mary, stay on the ship when it reached England and return to New York. The sea breezes having blown the cobwebs out of his brain, he would resume active trading."
"'What was his fortune when he died?', I inquired. 'Oh, he was broke.', I was told."
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