Words of caution heard before the wicked dive


Although stocks have recovered from much of last week's damage, many investors still suffer painful losses. Here are warnings, all printed before the plunge, which may alert us to danger signals before the "next time":

GOOD CALLS: "We haven't seen overvaluation like this since the 1987 market. It's time to become defensive." (Thomas F. Loeb, manager, Vanguard Asset Allocation Fund)

"High stock valuations will be decimated by rising commodity prices and higher inflation." (Personal Finance newsletter)

"Allocate less than 5 to 10 percent of your portfolio to Internet investments. Prepare for price swings of at least 50 percent in either direction." (Worth magazine)

"Market decline may be close. Record numbers of investors borrowed on margin to buy shares. With stocks declining, brokers are demanding payment of loans." (Maria Bartiromo in Individual Investor)

TIMING IT: "Momentum investors buy stocks that are rapidly rising in the belief that the rising price will attract other investors who will drive up the price even more. The key to this is recognizing when the momentum begins to fade." (American Association of Individual Investors Journal)

AND NOW WHERE? "Fed will raise rates as much as needed to tame the fast-growing economy." (Bob Brinker's Marketimercq)

"This is a correction and not a bear market because we have a strong economy here, and growing economies worldwide." (Walter Frank's "Moneyletter" in this week's Barron's)

"There are only 200-300 points of downside for the Nasdaq, and 2,000 on the upside." (Thomas Galvin, investment strategist)

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