How would you like to invest your hard-earned money at market tops each year? Sounds crazy, doesn't it? Don't be so sure.
A fascinating piece, "A Buying Opportunity!" published by Dean Witter Reynolds and sent to me by its local associate Vice President, Stephen Stauffer, shows that "had an investor put $2,000 into stocks (Standard and Poor 500-stock index) every year at the peak of the stock market, he would have more than quadrupled his money over the last 20 years. His portfolio would have appreciated to $180,000 from his cumulative $40,000 investment."
The article goes on, "The 'buy high' exercise presumes the investor leaves his money in the market through thick and thin and continues investing each year, validating the importance of a long-term perspective as opposed to market timing." The story adds that the last 20 years included four major recessions, the Vietnam war, 20 percent prime rate, 20-fold oil price increase, 18 percent inflation and a major market crash.
After pointing out that the same $2,000 invested in long Treasury bonds or 12-month CDs each year at stock market peaks would have netted only about $103,000, the story concludes, "Our bottom line postscript is simple: the commitment to invest is infinitely more important than the timing of the investment." (For a copy of the full letter, write Stauffer c/o Dean Witter Reynolds, 502 Washington Ave., Towson, Md., 21204 or phone 301-337-9393.)
WALL STREET WATCH: In a special "Wall Street Week with Louis Rukeyser" program last Friday, auto analyst David Healy said, "Auto stocks, now down about 30 percent, will rise again. I like General Motors, Toyota and Volvo." Arthur Smith, top oil analyst, stated, "Sure, oil prices have spiked, but in a year they'll be back to $25 a barrel. I also feel a U.S. invasion of Iraq is unlikely as our soldiers and the public are tiring, and this will worsen by Christmas." Michael Derchin, airline analyst, was bearish on the group, explaining, "airline jet fuel has doubled in price, but ticket prices haven't gone up that much." His favorite stocks are Delta, American, Southwest and Continental. (Speaking of "Wall Street Week," tomorrow night's program hosts SEC Chairman Richard C. Breeden with panelists Ralph Acampora, Martin Zweig and Mr. Ticker.)
LOOKING BACK: Someone sent me, "There Are Always Reasons Not To Invest," including: 1934, Depression; 1939, War in Europe; 194l, Pearl Harbor; 1946, Dow tops 200 -- market too high; 1950, Korean war; 1954, Dow tops 300 -- market too high; 1955, Eisenhower heart attack; 1962, Cuban missile crisis; 1963, Kennedy assassinated; 1974, steepest market drop in four decades; 1979, oil prices skyrocket; 1980, interest rates at all-time high; 1982, worst recession in 40 years; 1986, Dow nears 2,000; 1987, record-setting market plunge; 1989, October mini-crash; 1990, Persian Gulf crisis. (Ticker note: On Jan. 2, l934, the Dow Jones average closed at 100.36; for today's level, see "Market Watch" below.)
BALTIMORE BITS: Legg Mason will send its Oct. 16 "Company Comments" on Black & Decker, Preston Corp. and other local stocks . . . Mercantile Safe Deposit & Trust Co. says, "While we do not like the market, we favor a number of high quality stocks, including Caterpillar, Digital Equipment, Dow, Emerson Electric, Hewlett-Packard and K-Mart." . . . Smith Barney (via Rick Faby) states, "As a measure of the devastation, the NASDAQ industrials are down 31 percent, certainly a bear market decline. At the same time, the S&P 500 index is off 18 percent." . . . A suburban door-to-door vote solicitor for a Baltimore County Executive candidate spoke only to the husband of a Pikesville couple, prompting the wife to respond, "Women have the vote now, too." . . . Overheard at Burke's restaurant: "Having ordered a pizza, baseball player Yogi Berra was asked whether he would like it cut into four or eight pieces. 'Better make it four,' answered Yogi, 'I don't think I can eat eight.' "