Boring Portfolio Boring Sells SPY
October 25, 1996

American Stock Exchange
86 Trinity PL
New York, NY 10006-1881
Phone: 1-800-THE-AMEX

Closing Price, October 24, 1996: $70 1/4
Trade: Sell 100 shares

Recall that Standard & Poor's Depository Receipts, or "Spiders," were created by the American Stock Exchange in January 1993 as a convenient way for investors to buy and sell the aggregate stock of the companies represented in the S&P 500.

Spiders represent a unit of ownership in the SPDR Trust, a long-term unit-investment trust that was established to accumulate and hold a portfolio of common stocks intended to track the price performance and dividend yield of the S&P 500 Composite Stock Price Index. SPDRs normally trade at a value approximately equal to 1/10th of the value of the underlying S&P 500 Index.

When I purchased 100 Spiders in mid-July, the idea was to move some of the Borefolio's cash into the market in a simple, convenient way with the expectation of generating a short-term yield superior to that of the money market. Happily, I was able to do just that, managing to buy in the midst of the July doldrums. I'm now selling as the S&P 500 has zoomed above 700 -- and into a zone that appears a tad overvalued, to my eye.

Specifically, with a projected combined EPS of around $40 for the S&P 500 companies by year's end, the index is trading at nearly 18-times 1996 earnings. On a valuation basis, that's just a bit too rich for me, unless I were expecting: (a) an increased rate of earnings growth in 1997 relative to this year, (b) a decrease in short- to intermediate-term interest rates, or (c) both. Unfortunately, I find myself in bin (d): none of the above.

Sometime in the next five trading sessions, that's precisely what I'll be doing. Should I find myself again in a situation where I've got a fair amount of cash and no particularly bright ideas where to put it, you may well see me back at the Spider counter again.

--Greg Markus (MF Boring)