THE BIG PICTURE: (secular trend review)

http://www.pring.com/articles/return.pdf

• Average bear market last on average 18 months with a price loss of an average 28%.
• A projected 28% loss = SPX at 940.
• S&P has not broke below its 12 month MVA- which should confirm the end of leadership intact.
• Market should play catch up on the downside.

Basically, Pring argues that the multi-decade peak in optimism that occurred in 2000 has not yet been worked off. He writes: "These types of secular market turning points have always been followed by massive bear markets like the one that developed in 1929, or multi-year trading ranges as witnessed in the 1900/ 1921 and 1966/81 periods."

But Pring does add this caveat: "It's important to understand that while the position of the long-term indicators looks extremely ominous from a primary trend point of view, they have not been confirmed with a negative 12-month moving average crossover by the S&P [500]. And until that happened, assume the primary uptrend is intact."

Pring looks monthly closing prices, and right now he calculates the 12-month moving average will be about 1255 at month's end.

Graham was a value investor. He looked for well-run companies with low-priced stocks. Among his selection criteria:

* The company must not be a financial or technology concern. Graham favored more basic industry-type companies. Followers of Buffett, who know of his aversion to technology companies, now see where that aversion originated.

* The company needs annual revenue of at least $340 million. He wanted the predictability of developed companies, not young, developing ones.

* A current ratio (current assets divided by current liabilities) of 2 or more. This is a measure of liquidity. The more liquid a company is, the less likely it is to get into financial trouble.

* For industrial companies, long-term debt must not exceed net current assets (current assets minus current liabilities). This too is a measure of liquidity.

* Companies must increase their earnings per share by at least 30% over a ten-year period, and EPS must not have been negative for any year within the last five years. These are companies that have proved themselves over time.

* The P/E ratio, based on the greater of the current P/E or the P/E using average earnings over the last three fiscal years, must not exceed 15. Stocks with moderate P/Es are more defensive investments by nature.

* The price-to-book ratio multiplied by the P/E cannot be greater than 22. Graham liked tangible assets, and this is a measure of them balanced against the stock price