Bear market hints, ideas

The Ticker

October 18, 1990|By Julius Westheimer

With the Dow Jones average down about 13 percent for the year to date -- and other averages off much more -- we present bear market ideas for investors, brokers and onlookers.

IDEAS FOR INVESTORS: "Keep your powder dry and don't fire until you see the whites of their eyes." (Cummings Choice Letter) . . . "I like forest product stocks, natural gas issues and Manpower, a fallen angel." (Jean-Marie Eveillard, international portfolio manager) . . . "It's much too late to get out." (Gerald Pettit, Mutual Fund Letter) . . . "There's at least one chance in six that things could get a lot worse, like 1973-74, when stock funds fell 49 percent, but those declines are abnormal. If this drop is 'normal,' we may be two-thirds of the way through." (Michael Lipper, Lipper Analytical Services)

IDEAS FOR BROKERS: With business dull, mail lists of favorite depressed stocks to prospects and clients, showing each stock's current price and high point of last 12 months. Suggest purchase for the long pull or "dollar-cost averaging," i.e., periodic investing of a set amount of money, no matter where a stock or the market stands. When stocks are low, like now, investor gets more shares for his or her money. Attach a note: "These stocks represent fair values. Values may become better -- nobody knows -- but they're good investments now." (To attach importance to your letter, precede it with a phone call.) If clients are market-wary, suggest Treasury bonds to low-bracket people and tax-free bonds to high-bracket investors. Some tax-frees yield around seven percent.

LOCAL IDEAS: "It's only human nature to become more bearish as stocks go down, but at some point in the near future it will pay to start averaging in. We know we won't be able to pick the bottom, but well-selected stocks have provided 'heavenly' returns in the past and will in the future." (Joseph Wikler in The Rothschild Client Letter) . . . "Given no shooting war and a budget deficit compromise, stocks and bonds look attractive. With stocks down 16 percent from their highs and 10-year Treasuries up 70 basis points from year-end, both represent reasonable values." (Myron Oppenheimer in Security Trust Strategy Update) . . . "Economic prospects extending into 1991 look poor. However, action that sparks a recovery is at hand. Federal Reserve is likely to begin a more aggressive reduction of short-term interest rates." (David Donabedian in Mercantile Bank Economic Review) . . . "Stocks look cheap here; cyclical stocks look particularly so." (Craig Lewis for Investment Counselors of Maryland)

LOCAL TRAVEL IDEA: "International travel could be downright dangerous, so get reliable information about security risks before you go. Check large firms with foreign affiliations, such as McCormick & Co. and Black & Decker. Ask to speak to a staff person who travels to the country. Companies rarely receive calls like this and are usually willing to help. Wise: approach a company whose products you use, and say so." (The Safe Travel Book by Peter Savage)

FINAL IDEAS: Although Dow Jones average dropped 14.9 percent in third quarter, other damage was much worse: Value Line Composite down 22.9 percent, NASDAQ Composite off 25.5 percent, Nikkei (Tokyo) index minus 34.3 percent . . . On Wednesday, Oct. 24, Security Analysts host Broken Hill Proprietary Land Co., noon, Tremont Plaza . . . "Wall Street Week with Louis Rukeyser tomorrow night is all about "The Oil Mess." . . . On Tuesday, Nov. 11, Chapin Davis holds mutual fund seminar at 7:30 p.m. Call Ron Tomalis, 435-3200, for details . . . Since retirement from Fidelity Fund, Peter Lynch has been playing golf and vacationing in Greece with his family . . . Howard Johnson now serves Kosher ice cream . . . Over last 10 years, the S&P 500 stock average gained 270 percent, stock mutual funds only 207 percent . . . Since last weekend, three people approached me and suggested they sell their entire stock portfolios, often a signal we're near the bottom.

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