Stocks flash hopeful sign

Julius Westheimer

February 07, 1991|By Julius Westheimer

By moving sharply higher since mid-January -- a sustained advance could signal a short recession -- the Dow Jones average gained 42 1/2 points yesterday. When Wall Street opened today, the DJ average stood at 2,830.94, up 466 points, or 20 percent, since October's low. Historically, stocks climb steadily about four months before recession ends.

COMMENT DIVIDED: "We expect the Dow to break through 3,000 in 1991."(Smart Money). . . The road-based rally is the strongest in four years. Sentiment, monetary indicators very positive, but there is still economic risk." (Zweig Forecast). . . "Lower interest rates are not enough; recovery from past recessions always included fiscal policy." (Brian Fabbri, chief economist, Midland Montagu). . . "We are in the early stages of a small-cap bull market that started last October." (Kenneth Fisher, Forbes, Feb. 18). . . "The big money is bullish; that's not necessarily bullish." (Frederick Rowe, Jr. Forbes, same issue).

LOCAL LINGO: The Rothschild Co., for managed institutional funds, edged down 3.7 percent in 1990 vs. Standard & Poor's 500 index off 3.1 percent, but since inception (September, 1973), Rothschild is ahead 737 percent vs. S&P index 546 percent gain. The full Rothschild report (phone 539-4660) also shows that since September 1973, 91-day T-bills returned 335 percent, long-term government bonds 361 percent. . . S&P Outlook (Jan. 30), lists T. Rowe Price stock under "Fast-growing cash flow, moderate payout ratio, high return on equity" classification.

LOCAL MAILBAG: Security Trust (Maryland National Bank) will mail a four-page color brochure, "Investment Review: Bear Markets" if you phone investment chief Myron Oppenheimer (244-6590). . . Patrick Larkin, A. G. Edwards & Co., (547-1131) will send his firm's special report: "How to Buy Stocks in a Recession," with specific suggestions. . . Legg Mason (486-8010) has new comments on Baltimore Bancorp ("4th quarter roughly on target"), Hechinger ("earnings estimates lowered") and Loyola Capital ("earnings in line with expectations."). . . Harry B. Gorfine & Co. (539-5474) has a good piece on "The Marriage Penalty."

LOOKING BACK: Are recessions bad for Wall Street? Here are recession years, followed by S&P 500 stock index percent rise by 12 months after the recession: l957-58: 34.9; 1960-61: 12.9; 1969-70: 7.8; 1973-75: 28.3; 1980: 12.9; 1981-82: 27.9. (Source: Prudential Bache).

FEBRUARY FINDINGS: The Kiplinger Letter (Feb. 1) says the inflation rate could fall to 3 1/2 percent this year, the recession will bottom out this summer and the end of the war will quickly revive consumer confidence. . . Newsletters with top 1990 stock selections, according to Hulbert Financial Digest, were, in order (with percentage gains in parentheses): Your Window on The Future (111); Overpriced Stock Service (36); Medical Technology Stock Letter (32); MPT Review (l5); Fidelity Monitor (13). In 1990, the Dow Jones average dipped about 4 percent.

MIDWINTER MEMOS: Dollar Stretching Ideas advises: "If you have a $75,000, 30-year mortgage at 10 percent, you'll pay interest of $162,000. To save $34,000, add $25 a month to your payments.". . . Highest area insured CD rates, says 100 Highest Yields (Jan. 28) are at Maryland National Bank, Custom Savings, John Hanson Savings, Second National Federal Savings of Salisbury, Loyola Federal Savings & Loan, Eastern Savings Bank, Senator Savings Bank. . . Top tax shelters today, from Tax Hotline: retirement plans, rental real estate, children, mortgage interest, municipal bonds, life insurance, charitable contributions, business of your own. . . "If you are paying 11.5 percent or more on either a fixed-rate or adjustable mortgage, refinancing can save big money. Over the past two months, rates on the average 30-year fixed-rate loan dropped from 10.2 to 9.7 percent." (February Money)

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