Dow gains 12 as interest rates drop

THE TICKER

September 14, 1993|By Julius Westheimer

Continuing Friday's advance, the Dow Jones industrial average added 12.58 points yesterday and closed at 3,634.21. Interest rates edged lower again with the 30-year government issue now yielding only 5.87 percent.

Regarding many people's search for higher rates than CDs and bank deposits now provide -- a quest that often involves risky investments -- I recall the advice of the elderly woman in the musical "Cabaret" when she sang, "For the sun will rise and the moon will set, and you learn to settle for what you get."

HAPPY NEWS: Young people, want to build a nest egg? Get this: "If at age 18 you start socking away only $50 each month in a stock tax-deferred retirement account that compounds at 12 percent annually, you would amass $755,738 by age 60 -- and a whopping $1,377,000 by age 65. Sad: Many young families fritter away $50 a month and most savings programs are started too late to amount to much." (Bill Staton's Money Advisory) . . . "Since the capital gains tax rate is lower than the top income rate, you can now opt for price appreciation over dividend income by buying growth stocks and capital gains funds." (Fortune, Sept. 20) . . . "The good news is that many employment fields are much easier to enter at midcareer today than they were when the nation's employment was stable. Investigate fast-growing fields like computer programming, high technology, the 'new media,' etc." (National Business Employment Weekly, Sept. 10-16, on newsstands this week.)

UNHAPPY NEWS: Your third-quarter estimated income tax payments, federal and Maryland, must be postmarked by midnight tomorrow night . . . In Barron's Financial Weekly, Sept. 13, technician Justin Mamis finds scary parallels between today's stock market and patterns forming just before the October 1987 crash. Excerpt: "Tops aren't made in a day. Unlike bottoms, tops form over longer time periods. It's astonishing that there are so many similarities between now and before the 508-point plunge -- internal market deterioration, breadth contraction, utilities heading downward, etc." . . . "Series EE savings bonds purchased in the early 1980s may be earning less than you think. Trap: While bonds issued between November 1982 and October 1986 have been earning a guaranteed rate of 7.5 percent, this guarantee expires as the bonds reach face value -- after 10 years. The new rate is only 4 percent." (Dan Pederson in "The Savings Bond Informer.")

BALTIMORE BEAT: T. Rowe Price New Horizons Fund is listed under "Selected Issues: Mutual Funds" in Financial World, Sept. 1 . . . And "Mutual Fund Letter" says, "If the idea of a sharp stock market decline worries you, consider buying a conservative no-load stock fund such as the T. Rowe Price Equity-Income Fund, which shouldn't get hit so hard in bear markets." . . . Dean Witter's Jack Rosenbloom (547-7027) will mail "Implications for Investors in the New Budget Agreement" . . . Call Rick Faby (547-7000) for "Major Impacts of the 1993 Federal Tax Bill on the Municipal Bond Market" . . . Locally, Provident Bank, Allied Irish preferred, Bell Atlantic, Citizens Bancorp, Delmarva Power & Light and PHH Corp. stocks reached new 12-month highs in last week's generally lower market . . . McCormick's house organ, People, says that Boog Powell's Barbecue Beef Stand at Oriole Park at Camden Yards uses that firm's spices.

LOOKING AHEAD: "Remain bullish, keeping in mind the importance of staying on the right side of the bull market for the long term. The number of bearish [gloomy] advisers remains high, at 39 percent and climbing, while the bulls stand at 40 percent. These are not numbers normally seen at market tops." (Cabot Market Letter) . . . "Collapse of the European exchange system accelerated the rise of stocks. But now interest rate cuts are slow in coming, and earnings recoveries are a year or more away. Expect stock markets to flatten." (Foreign Markets Advisory) . . . "The 1990s should continue to provide investors with appreciation close to the gain in earnings of 6-7 percent per year, on average. In addition, a dividend return of 2-3 percent will provide total return for stocks above the return for cash or bonds." (Elaine Garzarelli, Lehman Bros.) . . . "Until short-term interest rates begin to rise we will maintain our heavily invested stock position. If interest rates continue to fall we will eventually raise our target on the Dow Jones average beyond the 3,700-3,750 level to 4,000-4,025." (The Sovereign Advisor) . . . "This rally has some life left left, but caution must be the watchword when we enter the latter half of September -- preparing for the notoriously unpredictable month of October." (Mutual Fund Strategist) . . . "My main fear and concern is that all the money flowing into the market will drive the Dow to 5,000. Then, I'd be very nervous, unless earnings keep pace." (Lee Kopp, investment adviser.)

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