Adviser sees more confidence from investors

The Ticker

November 17, 1992|By Julius Westheimer

Falling for the third day in a row, the Dow Jones industrial average slipped 27 points yesterday, closing at 3,205.74. The Dow has inched up only 1 percent from its Jan. 1 level, compared with last year's 10 1/2 -month jump of 11 percent.

LOOKING AHEAD: "As President Clinton assures capital markets of his likely 'conservative' fiscal policies, long interest rates should decline and consumer confidence return, fueling a significantly stronger 1993 in Wall Street." (The Prudent Speculator) . . . "One reason for our bullish outlook is the high level of investor pessimism. We like stocks that have come down to attractive buying points." (Nathan Capital Management) . . . "The stock market is still in the lower one-third of our fair value channel. Stocks are not overvalued." (Eads & Heald Investment Counsel) . . . "The worst the Dow Jones industrial average should suffer is a pullback to the 3,136 level at which it bottomed out in early October." (Ralph Block, Raymond James & Assoc.) . . . "Moving into long-term bonds is a risky course for investors needing higher yields. Carefully selected stocks may be a better alternative." (David Dreman, adviser)

DON'T SHOOT YOURSELF: "Optimism is hardly justifiable. The Dow Jones industrial average earned about $230 per share in 1989 and earnings have been dropping since then, now down to $58 (no misprint) per share. But dividends are way above earnings, around $104 per share. Dividends on the Dow for the last 90 years averaged 50 percent of earnings, so if dividends eventually decline to 50 percent of current earnings, we're talking dividends of $29. At stock market bottoms the Dow usually yields about 7 percent. A $29 dividend yields 7 percent from a Dow Jones average of 415, down 87 percent from here." (Robbins Planning Co.)

HOPEFULLY HELPFUL: "In this low interest rate environment, don't overlook zero-coupon bonds. If you put $4,560 into a zero coupon bond at 8 percent, your investment grows to $10,000 in 10 years. In 15 years $3,000 grows to $10,000. If you're patient for 30 years, $95 will reach $1,000 at 8 percent. The most valuable feature of the zero-coupon bond is that it lets you know exactly how much money you'll have at a future date." (Middle/Fixed Income Letter, Nov.) . . . "If you're in the right place and the right occupation, jobs are available. There's a shortage of physical therapists ($50,000 salary), experienced truck drivers, computer programmers." (Kiplinger's Personal Finance Magazine, Nov.)

BALTIMORE BEAT: Smith Barney's Rick Faby (494-1853) will mail his firm's latest 32-page research booklet, including data on housing stocks ("moving up") and utilities ("lagging again") . . . Phone Legg Mason's Gerald Scheinker (484-8010) for his 19-page Income Buy List, including some utilities yielding over 7 percent . . . "A close monitoring of earnings trends will be more critical to stock performance than any interpretation of the longer-term implications of the Clinton agenda." (Investment Counselors of Maryland) . . . "Illinois Tool Co. is in an industry that got beaten up in the '70s and '80s. This firm is one of the best-managed in the industry." (John Danz Jr., Oxford Capital Management Co.) . . . John Laporte, portfolio manager, T. Rowe Price New Horizons Fund, is pictured and written up in Forbes, Nov. 9. ("The rally in small growth stocks lasted 16 months. Then the music stopped. Hold on, says John Laporte. The band just took one of its normal breaks.")

MIDMONTH MEMOS: "Most Americans prefer a root canal operation to a high-pressure experience in an auto showroom." (MacNeil Lehrer News Hour) . . . "The believer is happy; the doubter is wise." (Hungarian proverb) . . . "No matter who would have won the election, prosperity is not just around the corner. When we pile up debts the way we did in the 1970s and 1980s, history shows that it takes a decade to unwind, resulting in 10 years of subpar economic performance. For example, it will take a decade to fill U.S. office space." (A. Gary Shilling, Forbes) . . Barron's, on newsstands this week, says that the top-performing mutual fund sectors this year to date were in health/biotech areas, the worst were gold. The article (page 45) adds that U.S. stock funds are up 4.2 percent to date this year, bond funds ahead 6.3 percent. . . . "Before making any charitable gifts this year, check to see if you have appreciated stocks. If so, use them. You get a full deduction and avoid capital gains taxes." (Tax Hotline, Nov.) . . . "Wall Street With Louis Rukeyser" marks its 22nd anniversary this Friday. Some behind-the-scenes experiences in Thursday's Ticker.

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