Market rally lifts DJI 28 points after bonds, dollar advance


November 15, 1994|By JULIUS WESTHEIMER

As bonds and the dollar moved higher, stocks rallied sharply yesterday and the Dow Jones industrial average advanced 28.26 points to close at 3,829.73.

Leading the parade, Chrysler climbed $3.125 to $49. (Don't cry, but I checked back and found that in 1990 you could have bought the stock under $10 a share.) Today, investors' eyes will focus on the Federal Reserve's interest-setting committee meeting.

ELECTION EDITION: "Right now, we have a nasty, nervous stock market. Investors seem much more concerned about the Nov. 15 Federal Reserve interest-setting meeting than they do about the election results." (Alan Ackerman, market strategist, Reich & Co.) . . . Speaking of the Fed, Business Week, Nov. 21, just out, says, "It's coming, and there's nothing you -- or even the Clinton administration -- can do to stop it. There's an economic slowdown in your future. That's what the Federal Reserve wants, and the Fed almost always gets its way. An interest rate move at its Nov. 15 meeting is now a foregone conclusion."

AFTER THE SWEEP: "Some defense stocks could benefit from a GOP Congress, though many strategists concede that tight federal budgets would limit any gains in defense appropriations." (Wall Street Journal) . . . "Stocks may like a Republican victory because Republicans are perceived as more pro-business and more fiscally responsible. But the bond market is nervous, fearing we might see widening deficits." (Elliott Platt, economic research director, Donaldson, Lufkin and Jenrette.)

MID-MONTH MEMOS: "Year-end Tax Tip: Don't buy a mutual fund right before it makes its annual capital gains distribution. If you do, you'll pay a tax on a return of your own capital. Find out the distribution date from your broker, and buy right afterward at a lower price." (Moneypaper, Nov.) . . . "Yields on long-term, high-grade municipal bonds are now 6.5 percent. With 1994 inflation at 2.7 percent, that is a 'real' return approaching 4 percent, much higher than the historic norm." (Business Week) . . . "If your mutual fund is down this year, you're not alone. To date, the average stock fund lost 5.21 percent, while the average bond fund fell 3.6 percent, one of the most prolonged 'down' periods in recent memory." (USA Today)

AUTUMN ITEMS: "When a financial professional contacts you with a 'unique' offering, understand 'unique' as extra investment risk. Buying thinly traded securities is incredibly risky. The more 'unique,' the less market, and therefore the more vulnerable you are." (Temper of The Times newsletter) . . . "Investing is a long-term proposition. Warren Buffett, one of the world's most successful long-term investors, once said, 'Someone is sitting in the shade today because someone planted a tree a long time ago." (The Patient Investor, Nov.) . . . "It is a wise person who lives with money in the bank. It is a fool who dies that way." (Bits & Pieces)

BALTIMORE BEAT: If you will bring money and/or groceries, I will give personal financial advice to individuals and families at Our Daily Bread soup kitchen this Saturday, 11 a.m. to 1 p.m. Complete details coming Thursday . . . John Gillespie, T. Rowe Price Growth Stock Fund manager, is written up at length in Barron's, Nov. 14. (Gillespie has been scaling back on cyclical stocks and getting on the growth stock bandwagon.) . . . "If, over the next few months, earnings continue to grow and the rate of inflation remains in 'acceptable' territory, stocks could provide substantial returns." (Investment Counselors of Maryland)

MARYLAND MEMOS: Among "Sun Stocks," Information Resources and Tracor reached 12-month highs in recent trading; Mid-Atlantic Realty, Harbor Federal, Noise Cancellation, Ryland Group and Washington Gas Light slipped to 12-month lows . . . On Tue., Nov. 22, at noon at the Sheraton Inner Harbor, Baltimore Security Analysts will feature the Newell Co. (makes hardware, housewares and office products), with William Aldredge, vice president, finance, as speaker . . . Procter & Gamble, which has two installations in this area, receives top billing in Money, Nov., under this headline, "P&G Tops The Companies With the Best Benefits."

NOVEMBER NUMBERS: As promised on WBAL Radio last week, here are some facts and figures about "zero coupon" bonds. Unlike traditional bonds, which pay interest semiannually, zero coupon bonds are sold at a price well below their face value. Your interest remains with the bond and compounds; you receive all of it back at maturity. For example, at 7 percent you need $700 to grow to $1,000 in five years, $500 in 10 years, and $350 in 15 years. See your broker for more details, including information about municipal tax-free zeros.

LAST LINES: "Don't make the mistake of confusing the economy with the stock market. They're out of gear with each other two-thirds of the time. A great example was back in 1973-1974 when the Dow earnings rose from $68 to $100 a share while the Dow crashed from 1,080 to 570! When President Clinton tells us the economy is healthy, don't confuse that with Wall Street." (The Cabot Market Letter) . . . "Woolworth stock ($15) is worth a look. Earnings appear to be turning around. Value Line ranks it a 5 (the worst) and this makes it a contrarian's delight." (Dick Davis Digest, Nov. 7) . . . "Attention business speakers: Public speaking is like spelling 'banana.' You've got to know when to stop." (Bits & Pieces) . . . "Why does the person who snores always fall asleep first?" (overheard somewhere).

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