Do recessions kill Wall St.?

The Ticker

October 11, 1990|By Julius Westheimer

Would a recession be bad for the stock market? Not if history is a guide. The stock market rose during six of the seven years of negative GNP (gross national product) growth experienced since 1950.

Here are recession years, all of which showed negative GNP growth, followed by Standard & Poor 500-stock index performance: 1954, up 53 percent; l958, ahead 43 percent; 1970, plus 4 percent; 1974, minus 26 percent; 1975, up 37 percent; 1980, a gain of 32 percent; 1982, plus 21 percent. One possible explanation: interest rates drop during recessions, a trend that generally increases demand for stocks.


"Convertible bond prices have been hammered by stock market weakness and by rising bond yields. Prices look mighty attractive." (Ben Weberman, Forbes, Oct. 15) . . . "Investors still seem relatively optimistic, and if that's so, the market is likely to react downward farther." (Robert Nurock) . . . "A disastrous October is likely, right? Wrong. Things are different this time -- most importantly, the extent of pessimism, which indicates the market's path of least resistance, is up." (Ned Davis Strategy Letter) . . . "In the next 18-24 months, we see a strong stock market, with DJ 3,500 well in sight." (Donoghue's Money Letter.) Take your choice.


Legg Mason will send its Oct. 2 letter with lowered earnings estimates on Hechinger and Black & Decker . . . Locally-produced "Wall Street Week with Louis Rukeyser" tomorrow night looks at the foreign investment scene with guest Jean-Marie Eveillard, international fund manager, and panelists Deborah Allen, Frank Cappiello, John Dessauer . . . Tuesday, Oct. 16, "Money Matters" hosts Mr. Ticker on Cable 17 (Baltimore County) and Cable 44 (Baltimore City), 8 p.m. on "Where Do We Go From Here?"


A friend writes: "I'm in shock. I just got my first bill ever from a collection agency and when I queried it, they said my insurance company -- where I've dealt for 40 years -- is dunning me for three months' fire insurance premium on my home, which I'm renting out. When I called my insurance company, they said their new computer mistakenly sent my premium bill to a wrong address last summer and, worse yet, they tell me my house hasn't been insured for three months and isn't insured now. I'm furious. The person I'm talking to says that the underwriters now question whether I'm eligible for fire insurance since I don't have homeowners' insurance with them. They admit that if they hadn't mailed my bill astray, this never would have come up. They've changed the rules, and my house isn't insured. They say they're 'working on it.' "


To prevent this from happening, make a calendar tickler note on each date when big premiums come due. Although a misdirected bill isn't your fault, a diary memo might prevent this kind of trouble.


The best-performing NYSE stock in the 3rd quarter was Motel 6 (should make Tom Bodette happy) . . . "Hospitality is making your guests feel at home, even though you wish they were." (My new 1991 pocket calendar) . . . These items cost less than a year ago: Full-length mink coat, fax machine, compact disc player, AT&T call, New York to Los Angeles (10 minutes), one dozen eggs . . . "If dividends on stocks are a sign of business health, corporate America's vital signs are slipping; latest round of dividend cuts is worriesome." (Business Week, Oct. 15) . . . Best third quarter mutual funds were, in order, Dreyfus Capital Value, Blanchard Precious Metals, Enterprise Precious Metals . . . "No doubt about it; the Dow Theory says we're in a bear market." (Barron's, Oct. 8) . . . "To squeeze out money for your 401(k), earmark your next raise for it." (Money, September) . . . "How serious was August's stock market correction? It was the second largest monthly loss since June 1980. October, 1987, was worse." (Hulbert Financial Digest)

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