After rallying sharply in early trading, stocks suffered a wave ,, of profit-taking yesterday. The Dow Jones industrial average, up 55 points at midmorning, closed with a loss of 10.22 points at 4,690.15. Long-term bonds gained about half a point.
AUGUST OPENERS: "Wiggle-watchers get whipsawed. Folks who invest on the basis of the economic indicators make more money for their brokers than they do for themselves." (David Dreman in Forbes, Aug. 14)
"The year's first half total return (gain plus income) for stock funds is the second-best ever, lagging only behind the first half of 1987." (Ian McAvity's Deliberations)
"The Dow Jones dividend yield has dropped to its lowest level of the century, now 2.6 percent. The Dow has always made long-term bottoms around a 3 percent yield." (Geraldine Weiss, Investment Quality Trends)
BUDGET STRETCHERS: "Keep track of all spending for a month . . . Before you spend, ask, 'Will this enrich my life?' . . . Set up an emergency fund of three to six months' salary to avoid putting large bills (car repairs, etc.) on your credit card . . . If your firm allows it, trade your vacation for cash . . . Evaluate your eating habits; limit pricey lunches out and expensive carryout dinners." (Family Circle, Aug. 8)
HEAT WAVE HINTS: "Beginning at age 45, if you want $1 million in retirement savings by age 65, investing at 8 percent, you must sock away $21,900 a year. But if you begin at age 25, you'll only need to invest $3,900 annually." (T. Rowe Price Associates)
"Before dumping stocks, ask yourself, 'How exposed to stocks am I? . . . If I sold, where would I put the money? . . . Could I invest it better? . . . What are the costs of bailing out?' " (Wall Street Journal)
DOW 5 UPDATED: Even in this high stock market, consider a long-term investment in the "Dow 5." Beginning in 1973, $10,000 invested in this strategy -- buying the five lowest-priced of the 10 highest-yielding Dow stocks and rearranging them annually -- returned $714,510 (no misprint), a 20.6 percent annual rate. Today's Dow 5 stocks are Chevron, Eastman Kodak, G.E., 3M and Sears. Check your broker.
MONEY FOR COLLEGE: "The surest way to afford tomorrow's college costs is to start investing today . . . Stay away from gimmicks, especially those marketed especially for college savings; one of these looks good but its yield works out to 4.5 percent vs. almost 7 percent on a five-year Treasury bond . . . Keep the savings in your name, not your child's . . . Aim for long-term gains with stocks." (Money, June.) Many libraries have copies.
NEW THIS YEAR: "Get written acknowledgments for charity contributions because under the new law a canceled check is no longer proof of a charitable gift that's over $250. Obtain letters as you make your gifts. The law requires that you have these letters before you file your return." (Tax Hotline, Aug.)
BETTER BOND BUYING: "Check credit ratings before buying tax-free bonds. 'Revenue' bonds pay interest from a bridge, highway, etc., but 'general obligation' bonds backed by a state or city governments are safer. Bonds rated AA- are safe enough. And watch out for bond 'insurance' -- it's never been tested in a full-scale recession. Buy bonds that make the grade without insurance." (Personal Finance, July 26.)
AVOID THESE ERRORS: "The three worst mistakes people make with their 401(k) plans are: (1) Not saving enough; contribute as much as you can ($9,240 limit this year) to maximize tax-deferred compound interest. (2) Investing too conservatively; don't put too much in money market and bond funds; stocks consistently outpace inflation. (3) Constantly shifting investments; settle on a strategy and stick to it." (Frank Russell Co.)
MARYLAND MEMOS: "We rate USF&G stock a buy. The company continues to demonstrate superior earnings growth through better cost controls and risk selection." (Legg Mason report).
"Richard Young's 'Intelligence Report,' Potomac, Md., suggests Topps as play on 'Batman Forever,' explaining, 'Topps is developing collectible picture products for the Batman sequel, an expected winner.' " (Dick Davis Digest)
"Sun Stocks" that reached 12-month highs earlier this week include Data Measurement, Legg Mason, T. Rowe Price and Travelers.
McCormick is listed and written up under "Five Mid-Cap Stocks Recommended" in S&P Outlook, July 26.
LAST LINES: "There has never been a 10-year period since 1945 when stocks, on average, lost money." (CNBC-TV.)
The latest (Aug. 7) U.S. News & World Report cover story, "Windows 95 -- Beyond the Hype: A User's Guide" is worth reading. It's on newsstands this week.
"Fifty-one percent of people about to retire look forward mostly to travel, 25 percent savor free time. Thirty-eight percent fear financial problems the most, 29 percent worry about health breakdowns." (USA Today.).
"A decent provision for the poor is the true test of any civilization." (Samuel Johnson).
"Eighty percent of drivers leave their car doors unlocked." (CNN News.)
"The rally's just beginning. Forget about Dow 5,000. Ten years from now we'll have Dow 20,000. That's 12.5 percent compounded." (Art Bonnell, Accolade Bonnell Growth Fund manager).
