1994 predictions abound as stocks continue to rise

The Ticker

January 18, 1994|By Julius Westheimer

Although profit-taking after Friday's rally hit some of the market's broader indexes, the Dow Jones industrial average closed up 3.09, to 3,870.29, its second straight high. Trading was light because of the holiday and the California earthquake.

JANUARY JOURNAL: Final reminder: Your fourth-quarter federal and Maryland estimated income tax payments must be postmarked by midnight tonight . . . "The income tax has made more liars out of the American people than golf has." (Will Rogers, 1924) . . . "To make a taxpayer pay up, it's practically essential to put him before a gallows." (Benito Perez Galdos, 1886) . . . "An overlooked consequence of President Clinton's ongoing efforts to boost world trade is that global investing will emerge as a great 1990s opportunity. And you can go global in your own backyard with familiar U.S. firms that do substantial business overseas, such as Coca-Cola, Colgate Palmolive, Fluor, Disney and Hewlett-Packard." (Money, January) . . . "Income tax deductions have been allowed for central air conditioning installed when a family member suffers a respiratory ailment, a trip to Florida to aid recovery from a postoperative throat condition aggravated by cold weather, travel to visit an ill child, a cat specially trained to alert its hearing-impaired owner to strange sounds, etc." (Tax Hotline, January)

IT'S ON US: Entries are flowing in for our 1994 stock market forecasting contest. The first-prize winner will receive dinner for two as guests of Mr. and Mrs. Ticker at the winner's favorite Maryland restaurant. Runner-up, ditto for lunch. The next 10 closest crystal ball gazers will receive best-seller financial books, average price $25.

Send your prediction of the year-end Dow Jones industrial average on a postcard (letters not accepted) to Julius Westheimer, Ticker Contest, Business News Department, 5th floor, The Baltimore Sun, 501 N. Calvert St., Baltimore, 21278. Print your whole number prediction (no decimals), your name, address and home phone number. Give reasons if you wish, but they are not required. Only one prediction per person and a coin flip unties ties. Your card must be postmarked by midnight Sunday, Jan. 30.

ATTRACTIVE AREA: "As long-term investors, we believe the area of greatest potential for capital appreciation in the U.S. equity market is in the mid-capitalization (mid-cap) area. We are increasingly confident that we are in the right place at the right time, given the recent change in the tax code and the fact that 'mid-cap' valuations remain attractive relative to the market as a whole." (The Rothschild Co. Letter to Clients, which the firm will mail if you write to it at 32 South St., Baltimore, 21202 or phone 539-4660.) The letter also quotes Ovid, 43 B.C.-17 A.D., "A middle course is the safest for you to take."

LOCAL LINE: Tomorrow, Frank Kuhar, chief financial officer, Education Alternatives, speaks to Baltimore Security Analysts Society and guests at the Sheraton Inner Harbor Hotel at noon . . . Richard Kodenski, Mercantile-Safe Deposit & Trust Co., writes, "We suggest having some cash reserves (15-plus percent), seeking yield support (Atlantic Richfield, Phelps Dodge), increasing international exposure where valuations are more reasonable (Nestle, Imperial Chemical) and rotating toward better domestic values, taking some profits in big winners and reinvesting in fallen angels (Apple, Borden, Novell.) Lastly, quality and consistent growth at a reasonable price are always attractive characteristics, such as in Johnson & Johnson, Minnesota Mining and Marsh & McLennan."

BALTIMORE & BEYOND: Stocks with local connections reaching 12-month highs recently include Bank of Baltimore (a possible takeover candidate), General Motors and Signet Banking . . . "Ninety-five percent of the world would settle for what the other five percent complains about -- cold restaurant food, delayed airline flights, hotel rooms near the elevator, etc." (Overheard in The Center Club) . . .

Asked to describe a "variable annuity" in response to several readers' queries, a local insurance person told me, "Variable annuities are insurance products that involve investments -- stocks, bonds, money funds, etc. The buyer won't owe tax on any investment gains until he or she withdraws the money after age 59 1/2 , but if he/she needs it before that, the owner has to pay a substantial withdrawal penalty."

LOOKING AHEAD: "A 15 percent drop in stock prices is more likely in the next six months than at any time since 1987, and rising interest rates could clip 5 percent or more off long-term bond prices." (Michael Sivy, chartered financial analyst) . . .

"The real market isn't performing as well as the Dow Jones average. Continue to maintain a defensive stance. Keep about half of your portfolio in cash until we see signs that the market is turning for the better." (Cabot Market Letter) . . .

"Since international investing is the hottest thing [in] the mutual fund area, we recommend these funds that specialize in various areas of global financial markets: Invesco, Vanguard European, T. Rowe Price New Asia, Vanguard Pacific, Mutual Discovery Series, Scudder Global Small Company, Fidelity Worldwide and 20th Century International Equity." (Mutual Fund Forecaster) . . . "I'm looking for the best of all possible worlds in 1994: Economic growth up 3 to 3.5 percent and inflation down to 2 percent. Stocks and bonds should do well." (Edward Yardeni, economist.)

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