QUARTERLY LETTER

Published Fourth Quarter 1995
Muhlenkamp Memorandum 36

Our comments of three months ago still apply. We suggest you review those comments. After returning to fair values in the second quarter of 1995, bond prices ended the third quarter with little net change but were quite volatile during the quarter. Similarly, modest changes in the stock market averages masked a lot of volatility in the prices of individual stocks and industries. Frankly, we expect this volatility to continue for a couple of months. So far, the patterns are fairly normal - a period of volatile prices after a sizable move. In July and again in September, the markets largely ignored two good excuses for a broad based psychological correction, but we're still likely to get one sometime soon. Frankly, this is normal. Normal means the trend is up, at an 8-10% annual rate, but you can get a 5-10% psychological correction at any time. Normal also means you want to own stocks in good, well-run companies, and we're trying to do just that!

Read our quarterly newsletter, Muhlenkamp Memorandum, for more by Ron Muhlenkamp.