Climbing stocks slip at end Dow up 8.75


January 26, 1995|By JULIUS WESTHEIMER

Stocks spent much of yesterday on the rise, climbing more than 28 points before sliding in the last hour of trading. The Dow Jones industrial average closed up 8.75 points to close at 3,871.45. Compaq Computer Corp. put a shudder through the market, and other technology stocks, by announcing that its profit growth in the first quarter would slow.

LOOKING BACK: "I sure hope the Republicans are able to cut the capital gains tax, but I'm not sure how that would affect

stocks. Looking back, we find that one month after the 1978 tax cut was enacted the Dow had lost 12 percent and the OTC was off 18 percent. The average stock had fallen 19 percent. Nearly 18 months later the Dow was still off 15 percent. About 6 weeks after the 1981 capital gains tax cut the Dow was down 13 percent, the OTC was off 16 percent and the average stock was off 15 percent." (Martin Zweig)

LOOKING AHEAD: "Investors in 1995 should buy three-month or six-month U.S. Treasury bills. I said early in 1994 that T-bills would beat the pants off all the averages, and 1995 should be a repeat of this year." (Charles Allmon, Growth Stock Outlook, Chevy Chase) . . . "We expect 1995 to be a more rewarding year for stock investors than 1994 was. Investors have not begun to fully value the bullish political revolution that took place on Election Day last November." (Scientific Investment, a Baltimore newsletter) . . . Black & Decker is listed under "Portfolio For Aggressive Growth Investors" in a recent S&P Outlook.

LAST CALL: Your entries in our 1995 Dow Jones forecasting contest must be postmarked by midnight Jan. 29. Write your whole number prediction (no decimals) for the Dec. 31, 1995, Dow Jones closing figure, and mail your postcard (no letters accepted) to Julius Westheimer, Ticker Contest, Business News Dept., Baltimore Sun, 501 N. Calvert St., Balto., Md. 21278. Winner receives dinner for two as guests of Mr. and Mrs. Ticker, runner-up ditto for lunch, plus 10 hardback books about money for the next closest. One entry per person. Four days left!

BALTIMORE BITS: Legg Mason's latest "Investor's Dozen" includes AT&T, Circuit City, Durakon Industries, HUBCO, Kranzco Realty Trust, National Auto Credit, NWNL Companies, Premier Bancorp, Standard Federal Bank, Texas Utilities, USF&G and Waban. . . . Tomorrow night, "Wall Street Week With Louis Rukeyser" is entitled, "The World of Pensions," with guest George Russell and panelists Elizabeth Dater, Robert Stovall and Martin Zweig. . . . McCormick stock is listed under "Recommended Food Stocks" in a recent S&P Outlook. . . . The T. Rowe Price International Bond Fund appears under "Greener Pastures: The Best Funds Abroad" in Financial World, Jan. 17.

MORE BALTIMORE: "Making the Most of Your IRA" is worthwhile reading in the Harry B. Gorfine & Co. January "Tax Report," available by phoning 539-5474. Highlight: "If you put $2,000 a year in your IRA for 10 years early in your career, say ages 25 to 35, that $20,000 can outgrow a $40,000 investment made later ($2,000 a year from 35 to 55). If both investments earn the same and are held until retirement at age 65, the smaller, earlier contributions will provide you with $151,000 vs. $131,000, assuming a 6 percent annual rate of return." The report also has an excellent chart showing growth of a tax-deferred IRA, with examples.

UNLOVED BARGAINS: "Want a way to beat the market? Write down the 10 stocks in the Dow Jones industrial average with the highest yields and then buy the five lowest-priced of those issues. Here are the percentage gains of the 'cheapest five' (lowest-priced) vs. (in parentheses) the gains in the Dow Jones industrial average for the years listed. 1991: 62 percent (24 percent); 1992: 23 (7); 1993: 34 (16); 1994: 9 (5); Over 5 years: 20 (10); 10 years: 20 (16) and 20 years: 22 (14). This strategy is known as 'The Dow 5.' " (U.S. News & World Report, Jan. 23)

HOPEFULLY HELPFUL: "If your New Year's resolution is to start saving, have $50 a month withdrawn from your checking account and have it invested in a stock mutual fund. Many fund companies have no minimum balance requirements for automatic investors. . . . If you're afraid of plunging a lump sum into the stock and bond markets all at once, place cash in a money-market fund and have set amounts transferred into a series of funds each month. . . . If you want to ease into stocks, have the interest from your bond or money market account swept into stock funds." (Business Week, Jan. 16, in a story, "Automatic Investing Strategies")

MIDWINTER MEMOS: "Look at the high yields that Uncle Sam is paying. The 30-year long Treasury bond yields 7.8 percent, and even the lowly six-month T-bill pays almost 6 percent. With the Consumer Price Index rising less than 3 percent a year, $l inflation-adjusted returns are far higher than in recent years." (Fortune, Feb. 6) . . . "In eight of the past 10 years, gains logged in January on the Standard & Poor's 500-stock index have tended to telegraph a good year ahead. If there were losses in January, it was a rough year ahead." (1995 Stock Trader's Almanac)

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