Drifting lower in sluggish trading, stocks eased 24 points yesterday. The Dow Jones average closed at 2,961.98 with one local broker commenting, "there's no avalanche of selling, just a lack of buying enthusiasm."
MARKET WATCH (in proportion received): "Without question, the major concern is the lofty valuation level of the most popular stocks. The S&P 500 and DJ 30 industrials stand at 18 times earnings, well above the market's normal 12 to 15 P/E range. And dividends are now 3.2 percent vs. seven percent in 1982." (The Insider, Norman Fosback) . . . "Will the Dow 2,000-3,000 area turn out to be a launching pad for a sustained bull market, or a major top? Evidence is overwhelming it will be a top, setting the stage for a serious decline." (Charles LaLoggia) . . . "I'm moderately bullish. We're in a slow growth, low inflation economy, both good for financial assets. You've got to be in stocks these days, especially growth stocks." (Ronald Hill, Brown Bros. Harriman) . . . "A major decline could begin at any time." (Elliott Wave Theorist)
BALTIMORE BEAT: A local construction man told me, "My father once said, 'Even in depressions some people will become millionaires while others will lose their shirts in boom times.' " . . . A Baltimore customs house broker said, "If business is slow, which it is, I make things happen. There's no standing still around here." . . . Overheard in The Poplar Inn in Dundalk: "The economy usually has four good years, then two 'down' ones. We had eight boom years under Reagan, now we'll have four bad ones. We've already been through two." . . . "1992 is a presidential election year and the market has gained in eight of the past 10 such periods. It will likely do so again next year." (E. Robert Quasman, Legg Mason) . . . A local broker who follows foreign markets told me that Japanese stocks are off, on average, about 30 percent in a year. The DJ average is up about 4 percent in the same period.
RIDDLE: If faced with the prospect of two possible gains, which would you choose? A 100 percent chance to win $3,000 or an 80 percent chance to win $4,000? Asked this question, most people choose the guaranteed $3,000, even though the second choice has a higher value according to probability. The value is determined by multiplying the chance of winning, or 80 percent, by the $4,000 the winner stands to gain (80 percent of $4,000 is $3,200), so in the long run you come out ahead by making the second choice constantly. Most people are bothered by the 20 percent chance of getting nothing in the second choice, which tells psychologists what stock market theorists knew all along: that investors in general prize certainty and abhor risk. (Data compiled by Rob Brown, local brokerage analyst.)
JUNE JOURNAL: Tomorrow night, "Wall Street Week with Louis Rukeyser" spotlights hotel and motel stocks . . . "The gap between CEOs and employees has widened steadily over 20 years. UAL chief Stephen Wolf made $18.3 million last year, 1,272 times the starting pay of a United Airlines flight attendant." (USA Today) . . . Kiplinger Washington Letter says that if you close your FHA mortgage this month you might save $1,000 at settlement because beginning July 1 there will be an extra one-half percent insurance premium .
. . The Census Bureau says that the best place to look for a wife is 40 miles away, in Washington (highest ratio of females to males) . . . If you want to write to members of Congress, a complete directory, with addresses, phone numbers, etc., is yours for $12.95 from Braddock Communications, 909 N. Washington St., Alexandria, Va., 22314 . . . "Although last year's earnings were lackluster, the outlook for Potomac Electric stock is brighter for 1991 and beyond. Yield 7.4 percent." (S&P Outlook)
. . . Did you realize that beginning last week the Securities and Exchange Commission instituted new rules making money funds safer than ever?