Charles Allmon, a bear waiting for the bull to stumble

INVESTING

February 26, 1996|By BILL ATKINSON

THE CRITICS SAY he's washed up as a stock market prognosticator, but Charles Allmon, expert stock picker, money manager, financial newsletter publisher and one of the nation's most ardent bears, is confident that he'll have his day again.

"Everybody is saying this guy Allmon has lost his touch," said the 75-year-old Mr. Allmon, who manages $175 million in assets for private clients and publishes the Growth Stock Outlook, a Bethesda-based financial advisory newsletter.

"I just want to have the last laugh and I think I'm going to get it."

This isn't sour grapes coming from a man who has missed out on a huge bull market, he says. Mr. Allmon believes the U.S. economy is set up for a financial debacle.

"These are really exciting times coming up," he said. "I think the economy is going to shock everybody, including Mr. Greenspan [Alan Greenspan, Federal Reserve Board chairman]. We are going to have a massive bear market. I think by the year 2000, we'll see the Dow off and the Nasdaq off 35 to 60 percent."

Mr. Allmon, a former National Geographic writer and photographer, has put together several trends to come up with such a dismal forecast.

The debacle will occur because the government is draining consumers and corporations of money to finance "give-away programs" -- namely welfare, Mr. Almon says.

"Our country is running out of money. The savings rate is so low and the money available to create jobs is not there. It is being siphoned off by gov-ernment but we get the government that we deserve, we want these give-away programs," he said.

Consumers, meantime, have spent beyond their means.

They are "tapped out," Mr. Almon said. "Loaded to the gills with debt."

A rising budget deficit and a slowing demand for housing won't help matters either, he said. Mr. Allmon's own home in Potomac has lost 30 percent of its value.

"I do not see this real estate market going any way but sideways or down for at least 15 years," he said.

Finally, a widening gap between the haves and the have nots could rip the country apart, he said.

"This educational system is one big, huge, colossal mess, which means the gap between the haves and have nots is going to widen, which means civil unrest," he predicted.

All of this spells a disaster for the stock market, Mr. Allmon contends. Mutual funds, the investment vehicle of choice for millions of unsophisticated investors, will bust, he said.

"Mutual fund holders who want to liquidate no doubt will get their money," Mr. Allmon penned in his Feb. 15 newsletter. "But perhaps not in cash! You may be paid 'in kind.' In other words, you'll probably be handed a fistful of securities, but God only knows what they might be."

Besides managing money for private clients and publishing the newsletter, Mr. Allmon was the owner of the Charles Allmon Trust, a closed-end fund listed on the New York Stock Exchange. But he sold it late last year because it took up too much of his time, and because of what he saw in the market.

"I could see the handwriting on the wall," he said.

Mr. Allmon's warnings ring a familiar tone. In an Aug. 23, 1987, interview with the New York Times, he predicted that the market was prime for a "pretty violent correction." The Dow Jones industrial average, he said, could drop by as much as 160 points in one day, and fall by as much as 35 to 50 percent.

"Everybody said you are absolutely crazy," Mr. Allmon said. "You know what happened two months later?"

On Oct. 19, the market plunged by more than 500 points, a 22 percent drop.

Mr. Allmon has been bearish ever since. Although he's known as a shrewd stock picker, he's protected his clients' money like a team of Wells Fargo guards by moving out of stocks in favor of short-term Treasury bills. The private portfolio he manages today is about 80 percent in cash, 12 percent in stocks and 8 percent in gold.

"We've been buying gold right along and I have been increasing it in some of our accounts," he said.

He does, however, like some stocks. One of his favorites is Citizen Utilities Co. in Stamford, Conn.

"Nobody wants it," he said. "The revenues, the earnings and cash dividends are up for 50 consecutive years. It is the best record on the New York Stock Exchange."

The performance of Mr. Allmon's Growth Stock Outlook paled last year when stacked up against the Dow and the Standard & Poor's stock index's 30-plus percent gains. His portfolio grew 12.2 percent last year, but it has been up 21 consecutive years.

The Hulbert Financial Digest, which tracks financial advisory letters, last year rated Mr. Allmon's Growth Stock Outlook as one of the nation's best performing portfolios on a risk-adjusted basis over a 15-year period.

"I'm not greedy," Mr. Allmon said. "I just want to have a decent return on my money."

His strategy hasn't been wholeheartedly embraced by all of his clients, who are generally over 55 and wealthy.

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