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Once again secondary stocks have started out the New Year with a burst of strength. Is it for real this time? Or is it just another January false start for secondary stocks?

The bounce stocks currently are outperforming the market by a big margin. In the early days of February, they have continued to soar.

While the New Zealand stock market did rally 7%-8% in January, it has few friends, not even in those few remaining New Zealand brokerage firms.

Readers should not confuse these forecasts with the more traditional economic and market predictions that appeared in our January issue. However, in the past, these “Fearless Forecasts” have, at times, been closer to the mark than the conventional predictions.

War, recession, falling oil prices and other good inflation news combined to support the U.S. fixed income markets in January.

Each January we publish the gold book (Perception II) before this, the green book.

The stock market rally in the fourth quarter considerably eased the equity performance pain of 1990.

Last month this publication discussed a "New Tax Selling Seasonal Factor" in the stock market resulting from the new mutual fund deadline for tax loss selling being October 31 instead of year end.

This publication often employs a question and answer format, providing answers to the questions being asked most frequently by institutional clients.

This publication continues to operate under the assumption that this is a more or less typical cyclical bear market in terms of magnitude and duration.

The table on the next page is a performance ruddown for our equity market sectors (and other measures) ranked by 1990 performance (only 33% of our sectors beat the S&P 500 in 1990).

Last year, we resumed a tradition started a number of years ago.

The committee at the National Bureau of Economic Research says it is a recession.

Self examination can be good for the soul, so each year time is taken to look back over the preceding year or so, critically reviewing the significant studies, portfolio shifts and recommendations appearing in this publication. Including the good....and the bad.

Finally! In November secondary stocks as a class, performed better than the S&P 500 and DJIA. One warm month for secondary stocks does not mean spring is here, but it may mean that spring is coming soon.

The most recent Major Trend Index sell signal, was transmitted to clients on Halloween 1989. Here in December 1990, this work is still negative, although significantly improved from a few months ago. But this work continues to indicate this is still a bear market.

A performance rundown for our equity market sectors and other measures ranked by November performance (75% of our sectors beat the S&P 500).

Secondary stock measures were up 7%-9% in November compared to 5%-6% for the capitalization weighted measures. All we can say is, it’s about time!

If you have major positions in the select list of 1990 “Hero” stocks (those big growth names that are up on the year), when should you start trimming back (if ever)? When should you start looking at cyclicals (if ever)? When should you start looking at cheap value stocks (if ever)?

West Coast Client Trip...Remembering Henri de La Chapelle...Twin Cities Presentation of “Other People's Money”... Comparing Large Firms Earnings Growth with Small Firms