Sounds like a potential fan of the Hussman funds approach, which
smoothly varies between long and hedged positions. Find their
very articulate and pursuasive web site, and see yahoo overview:

http://finance.yahoo.com/q/bc?t=5y&s...hstrx&c=%5EDJI

For unexplained reasons Karen Younge's post cannot be received. With
our apologies to her, here is the post.

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Subject: Books of Martin D. Weiss, PhD--anyone else read them?
From: Karen Younge <karenyounge[at]earthlink.net
I've recently read two books by this author, "The Ultimate Safe Money
Guide" (aimed at the over-50 investor) and "Crash Profits" (finacial
ad vice in the form of a novel). In both these books the author
advocates
that investors get their money out of the stock market, keep most of
it in Treasury-only money funds, and use various strategies like
reverse index funds and put options to guard against losses and even
profit, in a falling market. When the market is very low, you can also
get out of these more conservative investments and buy stocks at very
low prices, to profit when the market goes back up.

I've been doing a lot of reading about investing and finances
recently. On the one hand, books like "A Random Walk on Wall Street"
have got me convinced that a lot of the information put out for the
use of the individual investor is based on the idea that picking
individual stocks or
mutual funds and reading charts can get you performance that "beats
the
market", but that this idea has been investigated by academic
researchers
and shown to be statistically invalid. On the other hand, reading
Weiss
and his info about the ethical conflicts that come from the fact that
the people who rate the stocks and make the earnings projections and
audit the companies' books, are all "in cahoots" with each other and
don't give unbiased informaion in many cases--in fact the pressure
coming from their need to earn a living and sometimes their employers
can even push them in the direction of lying to the investor, churning
accounts and other stuff I don't want to have happen to me. As a
result
of all this (which was new to me) I've become pretty suspicious
of brokers, sales people passing themselves off as financial advisors,
and so on.

I'm trying to decide what to do with the small amount of savings I
have
so far (in 457 plan at work) and the larger amount I expect to have
avail-
able to invest in a few years after selling my house, in order to fill
the in-
come gap between my pension and my expected expenses. Since I'm pretty
risk averse, and also don't have time to recover from a bad misstep
(I'll turn
49 next month), the safety factor of Weiss' program appeals to me.

Two things about it make me rather nervous, though. One is the
interest
rates on these extra-conservative investments. I haven't checked
specifically
but I don't think they would even keep up with inflation. So if I did
what he
suggests, (and I'm right about the interest rates) wouldn't the
majority
of my
portfolio actually be decreasing in buying power, even though the
actual
dollar
amount in my account would be going up? Can reverse indexing, put
options,
etc, make up for this declining value and even grow the real spending
power
of a portfolio? It seems to me also that if you try this strategy and
the market
goes up instead of down you will suffer extensive losses just as you
would
if your investment strategy was based on a rising market but the
market
went
down. At the very least there will be a lot of money you could have
made
and
didn't.

The other factor that makes me somewhat nervous about this is that he
describes a chart-reading technique for deciding when to be in a
reverse
index
fund and when not to, to avoid losing money during rallies. You
compare
the
current price of the index fund to its 20-day moving average, and
compare two
other indicators--and depending on what you see, you buy the reverse
index
fund, sell it, or stay put whether you are in or out at the time. You
repeat this
every weekend and react accordingly. He does include a caveat: "The
procedure
is certainly not perfect; however, it should help you capture the bulk
of the po-
tential crash profits and also help protect you from losses". (Crash
profits are
gains you make because the market is falling.) Isn't this just another
kind of
market-timing strategy? When financial researchers say "you can't
predict the
market's future performance from the past", how broadly do they mean
it?
I've
seen the statistics showing that last year's top-performing fund is
rarely the
next year's best, or even close--that active management underperforms
indexes,
and so on. Might it be true that such a procedure will tell you to do
the right thing
a high enough percentage of the time to be useful, even thought it's
not
infallible?
Or does the research mean it's impossible ever to predict future
market
movements
for any time frame and any stock, fund, or index?

Have I got this right?

Karen


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-HW "Skip" Weldon
Columbia, SC