by Archie M. Richards, Jr., CFP^®
July 1, 2002

Dick, a 67-year-old businessman, plans to retire in a couple of years. Having $850,000 in stocks, he's "getting really concerned" and is "thinking of getting out altogether."

"The market has been going down for the last 5 weeks," he writes, "and there's no sign of a turnaround in the near future. Can you imagine if the terrorists hit us again? The market would dive!" He asks whether he should get out and put everything into "CDs or other fairly safe instruments."

When I was a broker and the market had been falling, Dick, the most reliable sign of a turnaround were desperation calls from clients who wanted to get out.

I don't know when the current bear market will bottom. But I'm confident the market will rise smartly in the next couple of years. Among other things, the 3rd and 4th years of the U.S. presidential cycle (2003 and 2004) are usually good years for stocks.

A decade from now, when you may need to spend your capital in a big way, the market will have risen enormously.

The market going down for five weeks in a row? This predicts nothing.

Another terrorist attack? The Dow could drop 300 points in the morning, rise 500 points in the afternoon, and continue up from there.

So what if the market falls! You don't need the money now. You're only 67. Plan on living another 33 years at least. Just keep focusing on the long term.

There's plenty of bullish news: The economy is growing rapidly. Corporations are cleaning up their act. European voters are starting to reject big government.

Usually, no obvious signs of a turnaround appear. The market just turns around.

Here's a fantasyland that would make investing a piece of cake: First, a bullish sign appears. Prices remain low, allowing everyone who's following the sign to buy. Lots of dumb people disregard the obvious bullish sign. They're willing to sell at low prices to those who want to buy.

After the buyers are all in, the market rises.

Later, a bearish sign appears. Prices stay up because the dummies disregard the obvious bearish sign. They're willing to buy at high prices from all who want to sell.

When all the sellers are out, the market falls.

Over time, everyone who follows the signs becomes filthy rich. This is made possible by the dummies who are always wrong but never run out of money.

Now let's return to reality. When a favorable sign appears (actually, it's a favorable surprise), prices rise immediately. The only ones who can take advantage are those that are already in.

Most of the time, no signs or big surprises appear. Stock prices just start moving for no apparent reason. Four-to-six months later, the reasons become clear.

No one knows why prices move first. My guess is, all those who take interest in stocks exercise their intuition about the future. The collective intuition of those millions of people is more accurate than the knowledge of any single person - and much more accurate than the press.

To deal with your anxiety, unplug your television, see a shrink, or both. Just don't sell.

The bulk of investor funds should be in an asset allocation program such as I've described in other columns. (See www.archierichards.com.) But with miscellaneous funds, buy Cell Genesis (CEGE, $13.5), a leading developer of cancer-fighting drugs.

Here are the basics of cancer: Immune cells search the body for cells that are potentially harmful. The good guys disable the bad guys.

But cancer cells are sneaky. They fool the immune cells into thinking the cancer cells are no threat.

For researchers, it's been a long, hard struggle. But with improved scientific tools, solutions are approaching. Cell Genesis is at the forefront. Clinical tests of its drugs have demonstrated considerable success in identifying and disabling the bad guys.

Investors currently value the company at $481 million (current price times the number of outstanding shares). This isn't much more than the company's cash and cash equivalents less current liabilities (a net of $312 million).

Investors are valuing the company's cancer-curing potential too low. Cell Genesis is a fine candidate for purchase.