Heartened investors give all indexes a lift

The Ticker

April 26, 1994|By Julius Westheimer

Encouraged by lower interest rates and what one local broker called "super bargains," investors pushed stock prices sharply higher yesterday. The Dow Jones industrial average surged 57.10 points, closing at 3,705.78. All key indexes ended the busy session in the plus column.

NIXON & WALL ST.: When Richard Nixon resigned the presidency on Aug. 9, 1974, the Dow Jones average stood at 777.30, on its way down in a sickening free fall from its peak of 1,051.70 (Jan. 11, 1973) to its low of 577.60 (Dec. 6, 1974), a 45 percent plunge. At the time, many analysts felt that the Watergate scandal was a major contributing factor in the market's dive. The Dow has almost quintupled since Mr. Nixon's resignation. And now where?

BEAR TRACKS: "Expect the stock market to continue to decline over the next several months, with the Dow average dropping to about 3,300. The Fed will likely raise short-term rates again in late April/early May. (Michael Metz, chief investment strategist, Oppenheimer & Co.) . . . "This is a long-overdue bear market. Utilities have dropped 24 percent since September; this index usually precedes the Dow by six months. This bear could growl two or three years." (Geraldine Weiss, Investment Quality Trends) . . . "Based on long-term trends, the bear market has hardly begun. We'll see a collapse into late April or early May, then a rally, then a downturn in the fall." (Robert Prechter, Elliott Wave Theorist) . . . "We're not in a correction, we're in a bear market to Dow Jones 2,700 level by late 1995." (Hussman Econometrics).

BULL SNORTS: "We now have technical readings similar to those in October 1987, which preceded a huge bullish phase. The interest rate scenario may cloud things, but the bulls are now in much better shape after a needed correction." (The Marketarian Letter) . . . "The market could drop a little further, but we haven't seen a top yet. A lot of things spooking the market won't spook it in a month or so." (The Daily Trader) . . . "The selling is greatly exacerbated by computerized program selling and a negative press. A sharp correction will be very healthy. We will stick our necks out. The bull market will resume." (Portfolio Monitor)

WHAT TO DO NOW: The Wall Street Journal, April 20, ran a good story headlined, "Long-Term Investors Can Reap Rewards From Buying Stocks During Bear Markets." Excerpts: "If you avoid buying stocks because you fear a bear market has begun, you could miss out on a good opportunity . . . Some of your best buys will be during a bear market . . . The bear market buyer is also sure of being in the market for the rebound . . . It takes an iron stomach to plow money into the market as prices tumble and for every $100 you invest you may have only $80 a few months later. It feels terrible . . . But in the 1973-74 crash, the worst since the '30s, someone who had $2,100 in stocks in 1974 would now have, if he/she held on, $124,000, twice the return of T-bills."

HOPEFULLY HELPFUL: "Here's news of a little-known college loan. Parent Loan for Undergraduate Students (PLUS) allows anyone to borrow the full college tuition amount from the U.S. government at an attractive rate -- now 6.64 percent. Strategy: First, take out a tax-deductible home equity loan. Use a PLUS to make up the difference. Loan applications can be obtained from the admitting college." (Raymond Loewe, financial planner) . . . "Include a personal business card when responding to a newspaper help-wanted ad. They're smaller and easier to handle, and are kept longer and reviewed by decision-makers more often than correspondence. Don't send out a company card; make up a business card for yourself, including a generic title such as 'cost accountant' or 'mechanical engineer.' " ("How to Get Interviews from Classified Job Ads" by Kenton Elderkin ($14.95.)

GETTING RICHER: Donoghue's MoneyLetter says you can be richer one year from now by these steps: "Pay down your credit cards, the easiest way to boost your wealth. Pay yourself first; if you can live on your present salary, you can live on 95 percent of it. Have an automatic payroll deduction stash that money in a stock mutual fund. Refinance your old mortgage; although rates have crept up, many people needlessly pay interest on their old high-interest loans. Maximize contributions to your 401(k) plan. Don't overlook your IRA; deductible or not, tax-deferred compounding allows your IRA to grow faster than in an outside investment."

APRIL SHOWERS: Sister Gwynette, director of Our Daily Bread soup kitchen, 411 Cathedral St., writes me, "Food donations are drastically down these days. I have never seen our shelves so consistently bare. I would appreciate any assistance you could give by writing in Ticker about our need for tea bags, sugar (lots of it), bread, canned goods, paper goods, peanut butter and jelly. We accept donations every day from 9 a.m. till 3 p.m." . . . Legg Mason's Gerald Scheinker (486-8010) will mail you his firm's "Utility Income Buy List." ("Year-to-date, the industry has underperformed, down 11 percent vs. 4 percent for the S&P 500 stock average. The decline has resulted from a 90-point increase in interest rates. Looking ahead, total industry return is expected to be 8.5 percent annually.") . . . Next Tuesday, May 3, we will print the names of those Ticker contestants who are closest to the Dow Jones average at this point.

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