Revived interest rate fears bring dive, partial recovery


January 19, 1995|By JULIUS WESTHEIMER

Rattled by a Federal Reserve report that said the economy was "vibrant," and worried that the Fed might raise interest rates again, investors sold stocks heavily yesterday morning and drove the Dow Jones industrial average down 24 points by lunchtime. But stocks recovered in the last hour, with the Dow closing at 3,928.98, off only 1.68 points.

FLOWERS & WEEDS: "Some people love to sell their stocks. That's generally a tragedy. They sell the stocks that go up and hold the ones that go down. That's like watering the weeds and cutting the flowers. They bought a stock at $10 and now it's $14. When they sell it, they think they've made money, but it may be the greatest mistake of all time. It could go to $80 or $150 and be the greatest stock of your life." (Peter Lynch in Modern Maturity, Jan.-Feb. issue.)

HOPEFULLY HELPFUL: "Bonds offer more assurance of income than stocks do -- and convertible bonds have an added kicker. In addition to the promise to pay a set interest rate and to return the face amount at maturity, the issuers will exchange your bond for a set number of shares of the underlying stock whenever you wish. If stocks take off -- especially your underlying stock -- the convertible owner shares in that growth." (Moneypaper, January)

CAREER CORNER: "Lessons Learned During a 13-Month Job Search" in this week's (Jan. 15-Jan. 21) National Business Employment Weekly is worthwhile reading. Highlights: "Look for a job six months before you feel you may be let go. . . . Build a contingency fund of at least six months' income. . . . Buy high-quality stationery with matching envelopes, or your resumes will look unprofessional. . . . Keep your family involved, to relieve stress on them. . . . Don't ever purge your old Rolodex; turn these sources into networking contacts. . . . Keep up subscriptions to industry magazines. . . . Work every angle simultaneously by 'having lots of pots on a hot stove.' "

LOCAL LINGO: "The collapse of the Mexican peso has created an investment opportunity, but in Argentina, not in Mexico." (Steve Hanke, professor of applied economics, Johns Hopkins University) . . . Legg Mason Global Governments (1-800- 822-5544) and T. Rowe Price funds (1-800-638-5660) are listed under "Funds That Let You Start Small" in Kiplinger's Personal Finance Magazine, February) . . . "The S.& P. 500-stock index rose a total of 10 percent over three years, hardly a bull market that calls for a correction." (Investment Counselors of Maryland)

WALL ST. WISDOM: "They're battered and bloody, but they may be real bargains. After a year of being whacked by interest-rate hikes and fears that deregulation would spark brutal price competition, electric utilities seem ready for a comeback. And, says T. Rowe Price's David Wallack, the market may have overreacted to these threats. But with deregulation on the agenda, utilities may no longer be the safe haven they once were, but the change may bring sweet rewards for astute investors." (Business Week, Jan. 23)

GIMME FIVE: "Since 1900, the nine years ending with 5 have never produced less than an 11 percent gain (1965) for the Dow Jones average. The best gain was 82 percent (1915). Similar moves this year would push the Dow, which began 1995 at 3,834, to 4,256 on the low end and 6,901 on the high end. If it just gains the average 34 percent, the Dow will end the year at 5,138. The year just before an election tends to be one of good economic health." (USA Today)

TAX TIP: "Update estate documents if they're more than three years old. Reason: Tax and legal rules, and your net worth, have probably changed. Before consulting your attorney, calculate your net worth by subtracting total debt from total assets. Include pensions, life insurance and value of your home. If your worth is more than $600,000 ($1.2 million for a joint estate), consider estate tax planning such as trusts." (Martin Shenkman, estate tax attorney)

MIDWINTER MEMOS: Tomorrow night, "Wall Street Week With Louis Rukeyser" is entitled "What's With the Fed?" with guests Lawrence Lindsey, member of the Board of Governors, Federal Reserve System; Allan Meltzer, professor of economics, Carnegie-Mellon University and Sen. Paul S. Sarbanes . . . Topics of Baltimore Security Analysts' meetings; Feb. 2 (rescheduled from Jan. 27) Morgan Stanley India Fund; Feb. 9, PHH Group; Feb. 15, Occidental Petroleum; Feb. 22, Comcast.

"Nearly 90 percent of all business offices use fax machines these days. Here's the history: In 1985, 3 percent used them; in 1990, 48 percent; this year's estimate, 97 percent and in the year 2000, 100 percent of all offices will have faxes." (USA Today) . . . From Legg Mason's recent "Utility Industry Overview Update": "We recommend increased selectivity; the improved outlook for the group, relative to the broader market, reflects significant underperformance since August 1993, leading to attractive relative market statistics."

The latest Kiplinger Washington Letter suggests that investors in upper-income tax brackets consider purchasing tax-free municipal bonds. The letter adds that yields will come close to 6 percent, equal to a taxable return of 9 1/4 percent for individuals in the 36 percent tax bracket.

New time: I answer your "money" questions on WBAL-TV (Channel 11) each weekday morning at 6:15, also several times a week in the noon newscast and on Saturday mornings at 8:15 . . . "A key ring is a device that allows you to lose all of your keys at the same time." (Bits & Pieces)

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