Dow backtracks slightly after two big runs

THE TICKER

July 27, 1995|By JULIUS WESTHEIMER

In what one local broker called a "consolidation day," the Dow Jones industrial average eased 7.39 points yesterday, closing at 4,707.06, after running up 72 points during the previous two sessions.

Bucking the industrials' downtrend, the Nasdaq index -- heavily weighted with high-technology stocks -- ended with a 6.43 point gain to close at 1,000.18.

WALL ST. WISDOM: "Buy only stocks of companies with a dominant position in a growth industry, a record of rising earnings and a commitment to innovation and research. Also, the firm must be able to pass on cost increases to the consumer." ("Preserving Capital" by John Train, investment counselor.)

BEST FOR YOU? "Which Of These Tax-Favored Investments Are Best For You?" asks Money magazine, August: (1) Tax-free municipal bonds. (2) U.S. Treasury securities. (3) Variable annuities. Read on:

DIGGING DEEPER: Regarding the above, excerpts: "(1) If your tax bracket is 31 percent, a tax-free bond yield of 5 percent equals a taxable yield of 7.25 percent, much better than on Treasury bonds.

"(2) Treasuries are the safest things you can buy, interest is free of state taxes, especially good for low-bracket people. (3) Don't rush to buy a tax-deferred variable annuity unless you're in at least the 28 percent bracket and already socked away the maximum in a tax-deferred 401(k)."

GOOD GUIDELINES: Here are significant "Key Benchmarks For Investors," from Kiplinger's Personal Finance Magazine, August.

Current trailing P/E ratio of S&P 500-stock index: 16.5 times earnings; year ago 20.2; historic high 26.3 (1992); historic low 3.6 (1946) . . . Dividend yield of S&P 500: Now 2.6 percent; year ago 2.8; historic high 10.1 (1931); historic low 2.6 (1995).

Yield on 30-year Treasury bonds: Now 6.6 percent; year ago 7.5; historic high 15.2 (1981); historic low 5.8 (1993) . . . Yield of long-term tax-exempt bonds: Current 5.5 percent; year ago 6.0; historic high 13.4 (1982); historic low 1.3 (1946).

LOCAL LINE: Tomorrow night, "Wall Street Week With Louis Rukeyser" looks at "The Economy and The Future," with guest Richard Hokenson, economist, and panelists Frank Cappiello, Elizabeth Dater and Carter Randall.

CNBC-TV recently pointed out that the stock of Maryland-based Giant Food, now around $32 a share, sold within the last year as low as $19.75.

Legg Mason's Gerald Scheinker will mail an update on BGE stock. ("BGE will be a top performer and we include the stock on our Utility Income Buy List.")

CAREER CORNER: "How To Make Your Career Recession-Proof: Tips For Survival" in Fortune, August, is worth reading. Excerpts: "Plan now; it's easier to find a job when you have one . . . Get feedback -- ask for an honest, frank appraisal from your boss . . . Build an emergency pool of 10 percent of your annual income . . . Avoid plastic; credit card debt is a killer in lean times."

MISS THOSE POTHOLES: 401(k) mistakes to avoid, from Frank Russell Co.: "Not saving enough; you must contribute as much as you can . . . Investing too conservatively; don't put all your money in money funds because stocks outpace inflation consistently . . . Constantly shifting your investments . . . Not choosing the right funds; study Morningstar and Value Line reports before buying."

NOTES & QUOTES: "Try not to withdraw funds from your retirement plan before age 59 1/2 ; penalties are staggering. You'll owe taxes, and there's a 10 percent penalty. If you withdraw $2,000, you'll keep only $1,400." (Family Circle, August.)

"If you don't have your own selling system when you're face-to-face with a prospect, you will unknowingly default to the prospect's system. His/her system never says, 'Sold.' It says, 'Salesperson loses.' " (David H. Sandler, Baltimore-based sales motivator.)

"Roseanne Barr figures that by the end of the century she should be worth around a billion dollars." (The New Yorker, July 17.)

The article says she was once a Denver waitress who made $1.50 an hour plus tips.

WALL ST. WATCH: August is historically an "up" month, rising an average of 0.3 percent over the past 44 years.

"With stocks up about 22 percent since January 1, it's time to take some profits. And don't blame yourself if a stock shoots up right after you sell -- you can count on that -- but repeat the old Wall Street saw, 'Bulls die rich, bears die rich; pigs die poor.' " (Money magazine, August.)

"Cyberspace is sexy, but the big bucks are in drama and comedy. Dominant companies in the entertainment industry will outlast computer hardware hellions when all is said and done." (Stephen Leeb, Personal Finance, July 26.)

MONTH-ENDERS: "Separate your broker's opinions about stocks from the data he or she provides. The data might be accurate, but opinions could be biased. Many -- not all -- brokers push stocks they want to get rid of." (Martin Weiss' Safe Money Report.)

"Energize Your Career Without Jumping Ship" in this week's National Business Employment Weekly is worth reading. Highlight: "Start by building better relationships with your boss, colleagues and other professionals in your industry, then seek new assignments.")

MONEY SAVERS: from The Tightwad Gazette:

"Buy good shoes cheaply at your local shoe repair shop; many owners sell unclaimed pairs at bargain prices."

"If AT&T sends you a discount coupon toward a room at Disney World, ask for cash instead. One woman asked and got a check for $60. It doesn't hurt to ask!"

"One reader who got a $180 speeding ticket told the magistrate she was guilty but couldn't afford the fine. The magistrate thanked the speeder for not lying and canceled the ticket."

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