Investors on sidelines as Dow falls 40 points

The Ticker

May 10, 1994|By Julius Westheimer

Frightened by news reports over the weekend that the Clinton administration had shifted priorities and was resigned to rising interest rates -- partly to protect the sagging dollar -- stock buyers remained on the sidelines yesterday. The Dow Jones industrial average dropped 40.46 points, closing at 3,629.04, as 30-year government bond rates climbed to an 18-month high of 7.63 percent.

WALL STREET ODDITY: "Stocks are the only commodities in America, where, when you lower their prices, no one wants to buy them." (Louis Rukeyser, host of "Wall Street Week.")

BALTIMORE BEAT: "BGE's first-quarter earnings were above our estimate. Total return from yield and dividend growth will slightly exceed the industry average." (Legg Mason's Research Weekly) . . . McCormick & Co. is written up at length in S&P Outlook, May 4, under "Growth Plus Value: High Earnings Growth Rates, Modest Price-Earnings Ratios." ("McCormick's shares are attractively valued and have appeal for above-average long-term capital gains.") . . . With the "Average City, U.S.A." listed as 100.0, Baltimore is ranked 105.9 under "Making Relocations Easier For Trailing Spouses: Comparing Salary Offers in Different Cities." (Figures from The American Chamber of Commerce Researchers Association.)

MORE BALTIMORE: Signet Bank is listed in Kiplinger's Personal Finance Magazine, May, under "Best of the Secured Credit Cards," subtitled, "Best cards for establishing credit, namely cards with low overall costs when you carry balances, or low minimum deposits." Phone 1 (800) 333-7116 for details. Signet is one of only six banks listed . . . In recent trading, Hechinger and SuperRite stocks reached 12-month highs; MedImmune, Legg Mason and Giant Food sank to 12-month lows . . . Dean Witter's Stephen Stauffer will mail you his firm's latest "Strategem" if you phone him at 592-3164. The issue covers "Is the bull market dead?" and "Why global diversification is critical for growth-oriented long-term investors."

TAX-SAVER: Business Week, May 9, runs a worthwhile story, "Making That Bond Hit Less Painful: Anatomy of a Bond Swap." Excerpts:

"You bought 50 Florida Turnpike Authority bonds (worth $50,000 at par) at 98, for a total of $49,000. They pay 5 percent, due July 1, 2014. Interest rates rise and your bonds' value drops from $980 apiece to $865, total $43,250. Sell your bonds, take a $5,750 tax loss, worth $1,610 in tax savings if used against a capital gain of 28 percent, or $2,227 against up to $3,000 of ordinary income in the 39.6 percent tax bracket. To maintain your position in the market, use the $43,250 to buy comparable bonds."

HOPEFULLY HELPFUL: "If you need cash, withdraw retirement funds last. Funds kept in an IRA, 401(k) or other qualified retirement accounts earn tax-deferred income. The longer the money stays in the account, the more benefit you'll receive from the compounding of tax-deferred investment earnings." ("Investment Strategies After the New Tax Act" by Martin Shenkman, CPA) . . . "Question good news about any stock. Some good news, such as changes of CEOs or basic corporate strategies, have dramatic long-term impact on companies, but surprisingly high quarterly earnings, for example, have no long-term significance." ("It's When You Sell That Counts" by Donald Cassidy, $19.95.)

SUCCESS SHARED: The Beardstown Ladies Investment Club of Beardstown, Ill., returned 24 percent to its 16 members last year vs. only 10 percent for the S&P 500-stock average. How did they do that? Spokeswoman Shirley Gross says, "Everybody knows that many stocks are lower-priced now than they were last winter, but that doesn't mean they're all bargains. Do this: Beforebuying a stock, find out its earnings and high and low prices for each of the past five years. Divide each year's high and low prices by that year's earnings to get a set of five annual high and low price-earnings (P/E) ratios. Add them up and divide by 10 to get the stock's five-year average P/E ratio. Then buy only if the current P/E is lower than the five-year average."

CAREER CORNER: This week's National Business Employment Weekly (May 8-14) is jampacked with valuable suggestions. Excerpts: "Securing comprehensive health-care insurance coverage is just as important as a good salary . . . When job-hunting, realize that there will be days when you can't accomplish anything . . . Exercise has proven to be a powerful antidote for jobless depression and stress . . . In a job interview, seek a decision from the interviewer. Don't let interviewers tell you, 'We'll think it over and get back to you' because you may never hear another word." The issue also gives specific techniques for taking control of a job interview. We'll print them in next Thursday's Ticker.

MAY FLOWERS: "From now on, easy money will talk at the Federal Reserve; Clinton has appointed two demand-siders to the central bank. So expect rates to get pushed down, and inflation to ratchet up." (Paul Craig Roberts in Business Week, May 16.) . . . "You can't borrow your way out of debt, so don't enter a loan-consolidation agreement that stretches out the term of your borrowing, no matter how attractive it sounds." ("Life After Debt: How To Repair Your Credit and Get Out of Debt Once and For All" by Bob Hammond, $14.95)

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.