It is decided that 52 (1940 = 10) seems to be a reasonable point in the light of the record of earnings and dividends. We propose to reduce our common stock holdings by 10 per cent when the average rises by 10 per cent from this point and to add 10 per cent to ourcommon stock holdings whenever the average falls 10 per cent. The second plan proceeds as follows: We believe that for our purpose, it is desirable to have 60 per cent of our fund in fixed-income securities and 40 per cent in common stocks. Every sixty days, we will review our portfolio and cut back our common stock holdings if the value exceeds 40 per cent of the total market value of the portfolio. Conversely, if the common stocks add up to less than 40 per cent of the total, we will add sufficiently to bring up the aggregate value of common stocks to the 40 per cent ratio. The success of these plans requires, in large part, that the course of common stock prices proceed in wave-like movements, thus If, perversely, stock prices continue to rise or fall without much interruption over a period of time, the formula plan will not work.


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