Vegetables, The Boogie Man, Cough Medicine, Yellow Jackets, War, and Stock Market Corrections have been on most people's Hate Lists. "Peggy Sue" made it to the top of the Hit List in the 50's, but "Every Day" was better. Perceptions change as people become more experienced and learn to deal with their environments; and to the experienced investor, corrections are truly beautiful things: Corrections are simply the flip sides of the hits the investment community calls Rallies. If you learn to 'play' the one, you'll be able to 'sing along' with the other."

Corrections come in all shapes and sizes, and can impact individual securities, a group or sector, an entire category like "value", "growth", "interest rate sensitive" stocks, or even the entire stock market. Irrespective of where the media tells you "we are" at any investment moment, there are always corrections going on in individual securities (MRK, TIF, & SUP for example). It's much easier to recognize sector or group downturns (drugs & telecom at the moment) and category meltdowns (value stocks in the late 90's and the dot.coms most recently). It is extremely rare for everything to "correct" at the same time...not even during the '87 computer loop was everything down!

Corrections (of all types) will vary in depth and duration, and both characteristics are clearly visible only in institutional grade rear view analytical mirrors. The short and deep ones are most lovable (kind of like men, I'm told) the long and slow ones are more difficult to deal with. Most corrections are "45s" (3 weeks in January, '05), so they are difficult to take advantage of with Mutual Funds. But with all this uncertainty, there is one indisputable fact: there has never been a correction that has not succumbed to the next rally...its more popular flipside.

Theoretically, even technically I'm told, corrections adjust equity prices to their actual value or “support levels”. In reality, it’s much easier than that. Prices go down because of speculator reactions to actual news, speculator reactions to expectations of news, and investor profit taking. The two former "becauses" are more potent than ever before because there is more "self directed" money out there than ever before. And therein lies the core of correctional beauty!  Mutual Fund unit holders rarely take profits but often take losses. Buy some of that correcting A-rated company (less than 5% of your portfolio); include a few stocks from that unpopular group (keep it below 20%); continue the process methodically until…until…you hear "Peggy Sue". Then start taking your profits. 

Steve Selengut
sanserve@...
800-245-0494
*********************Always...Buy One, Send One Free! *******************
"The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read"