Stocks in holding pattern, Dow inches up 2.70 points

The Ticker

February 18, 1993|By Julius Westheimer

After an 83-point fall Tuesday, stocks stayed in a holding pattern yesterday, awaiting President Clinton's State of the Union address. The widely watched Dow closed up just 2.70 points to close at 3,312.19.

AND NOW WHERE? "We've had a ton of good news. What else can go right?" (Jack Shaughnessy, Advest) . . . "Our recommended stocks list suggests a sell signal but market momentum, high cash positions and other criteria say we'll see higher prices, with maybe a 5-7 percent correction." (The Prudent Speculator) . . . "With the stock market trading at extreme historic valuations, the bubble is about to burst. Sheer momentum [demand for stocks] may drive the market higher, but risks are certainly growing for a serious correction." (David P. Jones Co. Investments) . . . "Your emotions are generally a reverse indicator of what you should be doing." (1993 Stock Trader's Almanac)

LOOKING BACK: "Does it really make sense to hold bonds in an investment portfolio? No, especially today. Long-term, bonds have a lower expected total return [gain plus income] than stocks. From all the way back to 1925 until today, stocks yielded a compound annual return of more than 10 percent, bonds a bit under 5 percent. Too long a period? From 1967 through 1982, the comparable figures are stocks 12.3 percent, bonds 4.9 percent. For the past 10 years, too, bonds lagged: stocks, 17.6 percent, bonds 13.8 percent." (Peter L. Bernstein, founding editor, The Journal of Portfolio Management)

LOOKING AHEAD: "Over the past two years bank stocks as a group have doubled. Have they had their run? No, according to a new model developed by New York-based UBS Securities which claims that many bank assets have been overlooked. We like Barnett Banks, First Interstate and First Chicago." (Forbes, Feb. 1) . . . The Kiplinger Washington Letter feels that, looking ahead, more lenders will offer reverse mortgages to homeowners 62 and up, letting them tap their equity for monthly income. Repayments are made when houses are sold or at death.

HOW TO MAKE MONEY: "Over the past three years, we've reported on one of the smartest, simplest strategies for someone with at least $10,000 to invest: Buy roughly equal dollar amounts of the 10 highest-yielding stocks in the 30 Dow Jones industrials. A year later sell any that have fallen out of the Top 10 and buy the new high-yielders. The odds of beating the market averages with such a system are mind-blowing: Since 1973 the Top 10 earned an average total return of 16.8 percent a year. For 1993 these would be IBM, Westinghouse, Texaco, Eastman Kodak, Chevron, Exxon, Union Carbide, Sears, American Express and United Technologies." (Money, February)

LOCAL LINE: Phone Legg Mason's Gerald Scheinker (486-8010) for his firm's Quarterly Health Care Monitor, discussing this country's aging population and selected health care stocks . . . Ferris, Baker Watts' Morry Zolet will mail you a pamphlet, "Quality Growth Recommended List" if you phone him at 659-4601. The list shows price, yield, five-year growth projection, price-earnings-ratio and comments . . . Rowe Price Equity Income Fund is recommended by three newsletters followed by Hulbert Financial Digest . . . Rowe Price International Stock Fund is recommended by five newsletters followed by Hulbert.

HOPEFULLY HELPFUL: "Half of all medical costs are incurred in a person's last five days of life; therefore the decision about where to die -- in a hospital or at home -- must now be given serious thought." ("150 Ways to Be a Savvy Medical Consumer" by Charles Inlander, $5.95). . . "Yield boosters for investors concerned about low money-market rates include tax-free money funds, short-term bond funds, Series EE Savings Bonds and 'junk bond' funds that offer high yields and high risk." (Income & Safety Letter, by Norman Fosback) . . . "Contribute as much as possible to your company's 401(K) pension plan. Money you save is in pretax dollars and tax on earnings is deferred until you start withdrawing money at retirement. Net effect: $7,000 of earnings saved annually for 30 years and invested in a CD or government bond grows to $379,000 outside a pension, but to $793,000 (no misprint) inside one. ("Lew Answers Your Questions About Money" by Lew Altfest, $19.95) . . . "If you're still procrastinating, do something -- anything -- immediately; break down overwhelming tasks into smaller pieces; ask help from a colleague; delegate responsibility. ("Balancing Acts! Juggling Family, Work and Recreation" by Susan Stautberg, $12.95) . . . "Attitudes Employers Don't Like: Not my job, need more money, need more help." (Robert Half) . . . "Do your work with all your heart and you will succeed -- there is so little competition." (Elbert Hubbard)

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