Prime rate action buoys investors Dow climbs 18

The Ticker

September 16, 1993|By Julius Westheimer

Encouraged by two banks' decisions to lower their prime lending rates -- moves often followed by more financial institutions -- investors pushed stocks higher yesterday. The Dow Jones industrial average gained 17.89 points and closed at 3,633.65, now only 20 points below its all-time high and 332 points above its New Year's Day level.

MONEY TALKS: "Great wealth and contentment seldom live together." (Thomas Fuller, 1732) . . . "It is better to have a permanent income than to be fascinating." (Oscar Wilde, 1895) . . . "No rich man is ugly." (Zsa Zsa Gabor, 1975.)

FASTEN SEAT BELT: Arthur Jensen of the CPA firm Wooden & Benson sends along this note: "High wage-earners' new top rate in Maryland looks like this: federal 39.60 percent, Maryland and local rates (depending on the county) 9 percent, additional Medicare rate 1.45 percent, totaling 50.05 percent. The 50 percent tax bracket is back!" Upon request ([410] 825-4860), he will mail a booklet, "Omnibus Budget Reconciliation Act Affecting Individuals and Business."

LOCAL LINE: Tomorrow night, locally produced "Wall $treet Week With Louis Rukeyser" focuses on "Venturing for Bargains" with guest Shelby M. C. Davis, portfolio manager, New York Venture Fund, and panelists Frank Cappiello, Harvey Eisen and Michael Holland . . . Next Tuesday, Baltimore Security Analysts is host for Legg Mason Inc., with CEO Raymond (Chip) Mason as speaker, at Stouffer Harborplace at noon . . . Craig Lewis, Investment Counselors of Maryland, writes: "In the domestic equity market, we continue to find more value in cyclical stocks. In the past few weeks these stocks have experienced profit-taking and their relative attraction has improved." . . . Stocks that reached 12-month highs this week include Bell Atlantic (parent of C&P Telephone Co.), Delmarva Power & Light, PHH Corp. and Provident Bank.

SEPTEMBER SONGS: General Motors, with a big manufacturing facility here, is listed under "Stocks at a Discount" in a recent S&P Outlook . . . Dividend yields on the S&P 500-stock index have sunk to 2.72 percent, down from 2.98 percent one year ago. Any yield below 3 percent is usually regarded as a danger signal for stocks . . . On the more cheerful side, the "yield spread" between high-grade corporate bonds and Dow Jones industrial stocks now stands at 3.79 percentage points, down from 4.49 one year ago. The narrower the spread, the more attractive stocks become.

WORKPLACE WISDOM: "As the post-recession workplace takes shape, one thing is clear: Many more people will work on contract in temporary jobs rather than as employees. They will negotiate their fees and pay for their own benefits. Organizations are moving toward a core group of employees and, surrounding them, a group of workers who come and go. Companies now are hiring executives, accountants, lawyers, engineers, computer scientists and research people for temporary positions." (The New York Times, under "The New Career: Temporary Work," Sept. 12.)

NOTES & QUOTES: The Kiplinger Washington Letter predicts that Congress will approve NAFTA (North American Free Trade Agreement) after all arguments are heard . . . "No nation was ever ruined by trade." (Benjamin Franklin) . . . "A simple strategy that forces investors to ride out inevitable Wall Street storms is 'dollar cost averaging,' in which you commit a set amount of money at regular time intervals to a stock or mutual fund -- without regard to stock prices or the environment. The amount can vary depending on your financial situation -- $50, $100, $500 or $1,000 -- at consistent time intervals, no matter the price of the stock or the level of the stock market." (Dick Davis Digest.)

HOPEFULLY HELPFUL: "If you're one of the four out of five homeowners who have not refinanced their mortgages as interest rates hit their lowest point in 25 years, consider this: You can reduce your rate on a 30-year fixed loan to 7 percent or less without spending an extra dime up front by choosing the increasingly popular 'no-cost' refinancing plan offered by most lenders. Of course, no cost doesn't mean no fee. The lender just builds fees into a higher rate. But if your mortgage is above 8 percent and you can get a 7 1/2 percent rate with no closing costs or points, you will still save on your monthly payments." (Business Week, Sept. 13.)

LOOKING AHEAD: "The stock market could stay overvalued for a long time, but we're at a level where accidents could happen." (David Shulman, chief equity strategist, Salomon Bros.) . . . "Stocks have entered the third stage of the bull market, which will really take off after Christmas and drive the Dow average above 4,000." (Don Hays, director of investment strategy, Wheat, First Securities)

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