2 Price experts bullish on 1997 And at Legg Mason, business is so good they may buy a bank

December 05, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

NEW YORK -- A top executive with T. Rowe Price Associates Inc. said yesterday that he doesn't see a stock market crash on the horizon and that the bull market's rally should carry over into next year.

M. David Testa, director of the Baltimore-based mutual fund company's equity division, said low inflation, low interest rates and strong corporate profits augur well for the market as it heads into 1997.

"People have the impression that when you look at the U.S. market, you are skating along the edge of a precipice or doing a high-wire act," Testa told reporters yesterday at Price's economic outlook news conference here.

"But we could have another year like 1996 or '95, when the market surprised people quite favorably. It would be very surprising if we fall off the high wire and went all the way down to the pit that we were in in the 1970s and early 1980s."

Testa expects the stock market to grow in the high single digits in 1997, a far cry from its dramatic surge in 1995, when the Dow Jones industrial average rose 33 percent, and this year, when it has climbed another 25 percent.

"I propose that we should enjoy it for a bit," Testa said.

What could go wrong with his forecast?

Labor costs could rise, squeezing corporate profits and overseas markets could tumble, he said.

Paul W. Boltz, the Baltimore-based mutual fund company's chief economist, is equally enthusiastic about the market's prospects. The markets are performing in an extraordinary way," he said.

Boltz said he expects the economy to continue growing at a slow and steady pace: "I don't see a recession on the horizon." But he is worried that consumers are still spending too much money and increasing their debt levels.

"If consumers are tapped out, nobody told them," Boltz said. "We are getting to the giddy levels of the late 1980s. "I am getting a little worried about this."

The boom in the stock market has meant huge profits for Price and for Legg Mason Inc., whose executives held a news conference in New York yesterday.

Raymond A. "Chip" Mason, chairman and chief executive, said revenues should reach $571.5 million for Legg Mason's fiscal year ending March 31, up from $516 million in 1996, and more than double over the past 10 years.

"Our performance has been sensational," Mason said.

But that strong performance, coupled with a low price-to-earnings ratio of 13.5 percent, could make the Baltimore-based brokerage and investment bankingfirm an attractive acquisition target.

"That is in the eyes of the beholder," Mason said. "Our interest is to keep growing and to keep building.

Mason said the company is looking for its own acquisitions to beef up its investment advisory business, and that it is considering buying a commercial bank.

"It is likely that we will be in the banking business in an electronic sense," Mason said.

Pub Date: 12/05/96

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