Two weeks ago on the coast-to-coast TV program "Wall Street Week with Louis Rukeyser," I said, "We're headed for real trouble in Wall Street; I'd settle for 200 or 300 points. All the conditions are in place: a severely overpriced stock market with P/E ratios double last year's, a real estate depression like the 1930s, an ongoing recession that the government doesn't admit to or know what to do about, shaky banks and so on. People should cut back if their stock percentages are too high."
And when Rukeyser asked me, "Julius, if what you say is true, why shouldn't people sell out altogether?" I responded, "For two reasons: First, I could be wrong -- it wouldn't be the first time -- and second, people who sell out never come back. And for the long pull stocks are the place to be. But at this point you must calculate your risk-reward ratio. What's the reward -- 10 percent? Big deal. What's a risk? A lot."
(Regarding the above phrase, "if their stock percentages are too high," I suggest 75 percent in stocks for young people, 50 percent for middle-aged and 25 percent for elderly.)
Friday's mini-plunge didn't surprise me a bit. And there could be more. And when President Bush said casually on Saturday, "No reason to get all concerned," I reacted, "But the White House NTC should be concerned about the weak economy that is partly responsible for the plunge."
BACK TO WORK: How do you stop warfare between fighting workers? "Seven Steps for Making Peace Between Staffers" in Working Woman, December, is worth reading. Excerpts: "Listen to both people to understand their feelings. . . . Get each employee to listen to the other. . . . Check your own perceptions of the problem by asking questions. . . . Point out where you think the employees misunderstood one another. . . . Ask if either can suggest a solution that everyone can live with. . . . Create a face-saving situation should one person be perceived as the loser. . . . Monitor the solution's success."
MARYLAND MEMO: "Relying on your regular market may keep you comfortable when demand is healthy, but if business falls it pays to create a whole new market for your firm," says Nation's Business, November, when referring to Irene and Reuben Martin, owners of Seabrook Tire & Auto, Seabrook, Md. Excerpts: "They had to ferret out new clients when their 'flier' advertising fizzled. . . . To meet new clients, Irene began attending local business fairs, seminars, workshops, asking people if they had a fleet of vehicles. . . . Sometimes they had their own mechanics, often they would need us. . . . At first it was sporadic, but calls finally came."
MID-MONTH MEMOS: Fixed-rate mortgages, now about 8.7 percent, stand at their lowest levels since March, 1977. . . . As of this morning, Dow Jones P/E ratio is 29 vs. 13 one year ago. . . . Our Daily Bread soup kitchen opens at its new site, 411 Cathedral St., at Franklin, Sunday, Dec. 1. Please bring peanut butter, sugar, tea, plastic bags, or send money. With recession, lines are longer than ever. . . . Weekend TV comment: "Stocks will not snap back soon, could drop another 150 points." (Howard Colhoun) . . . "We're in a double-dip recession." (Martin Zweig) . . . "Fed will continue to lower interest rates." (Louis Holland) . . . "Reminder: employees under 59 1/2 have just 60 days to roll lump-sum distributions from tax-deferred retirement plans to avoid 10 percent penalty." (Business Week, dated today).