Let the chips fall where they may. When you grind out seven distinct investment letters and you think the stock market is too risky, you have to call it as you see it. It's just that you must present that call a lot of different ways.
"Stocks are high-priced and, while that doesn't preclude the possibility of a creeping bull market, it does cut its potential," warned Norman Fosback, newsletter editor for the Fort Lauderdale, Fla.-based Institute for Econometric Research. "I don't see the likelihood of much more than a 10 percent rise over the next year, and, of course, there is also exposure to correction."
Those are tough words in the investment letter business, especially from someone whose publications have 260,000 subscribers.
Fosback has found, as other newsletter editors have, that when the stock market is up and talk is bullish, circulation climbs. Hit some market rough spots and talk doom and gloom, and circulation languishes.
With a staff of 115 people, half in telemarketing, located in its large office building at 3471 N. Federal, Fort Lauderdale, Fla. 33306, it's easy to see why the institute sells a lot of subscriptions. But I've always been fascinated with how Fosback keeps his logic straight throughout all those letters, each of which is aimed at a particular investor.
Here's his current cautious stance as reflected through his publications:
Market Logic, a twice-a-month letter known for its core stock portfolio, isn't recommending much. The portfolio is divided 50/50 in stocks and money-market funds. Fosback likes few stocks, except for Amwest Insurance Group and Presidential Life, the latter a speculation on its junk bond portfolio. Two construction picks are Kasler Corp. and Granite Construction.
The Insiders, a twice-monthly advisory on trading by corporate insiders, detects little activity by informed bigwigs in 1992. A few firms worth monitoring because their executives have been buying shares include North Carolina Natural Gas, Enhance Financial Services Group and Core Industries.
New Issues, a monthly guide to initial public common stock offerings, finds individual investors have abandoned the IPO market in recent years. New issues Fosback picks include General Instrument, Express Scripts and the soon-to-to-public MicroTouch.
Mutual Fund Forecaster, a monthly with 175,000 circulation to make it the biggest of this brood, for active traders suggests Twentieth Century Ultra Investors, Berger 100, Janus Twenty and Founder's Special. Among closed-end funds, picks are General American Investors and Quest for Value Capital.
For average investors, it recommends AIM Charter and Gabelli Asset, along with previously mentioned Twentieth Century Ultra, Janus Twenty and General American Investors. From funds with unlimited switching, it favors Gradison Opportunity and Reich & Tang Equity.
Fund Watch, which each month monitors "high performance" mutual funds, is designed for the do-it-yourself investor and trader. Current picks are Fidelity Contrafund, AIM Constellation and Fidelity Magellan, all with above-average volatility.
Income & Safety, a monthly look at the conservative side of the market, takes the stance that interest rates will rise and long-term bonds should be avoided. Stick with short-term money-market instruments, such as Fidelity's Spartan Money Market Fund and Spartan U.S. Government Fund, both of which offer a yield of around 4 percent.
For those in higher brackets, tax-free money markets make sense, among them Calvert Tax Free, offering 4 percent tax-free through a lot of junk bond risk. Others are Fidelity Tax Exempt Money Market Fund and Scudder Tax Free Fund, offering 3 to 3.5 percent tax-free.