Strong dollar helps some stocks, but can hamper major exporters

The Ticker

February 12, 1997|By Julius Westheimer

Today we answer readers' questions:

DOLLAR DOINGS: "Does the recent strong dollar affect my stocks?"

The dollar's ups and downs don't affect the whole market; certain groups benefit while others falter.

The strong dollar, which last week hit a four-year high against the Japanese yen, helps retailers like Circuit City, Dillards and Nordstrom that sell mostly in the United States but buy goods abroad.

Yet the rising dollar is most harmful to "multinational" firms that are big exporters, like Microsoft, Compaq Computer, Novell, Warner-Lambert and Minnesota Mining and Manufacturing.

Forbes currency columnist Andrew Krieger recently told me, "For exporters, a strong dollar makes effective currency management much more challenging."

Late last week, Treasury Secretary Robert Rubin said the administration will end its two-year effort to drive up the dollar against foreign currencies.

BEARISH BULLETINS: "When I hear scary financial news on radio or TV, should I sell my stocks?"

Don't let every negative story upset you. In May 1994, Barron's ran a bearish cover story on Coca-Cola, "Has Coke Lost Its Fizzle?" The stock, $21 then, now sells around $58.

In October 1994, a gloomy Business Week article on Disney was headlined, "Is the Magic Over?" The stock was $38 then; it's now about $75.

Proceed in any orderly fashion, and don't let every news bulletin jolt you.

TIMING TEMPTATION: "You always say not to 'time' your buys and sells. Can't I try?"

Good luck, but the evidence points against timing. For example, 50 percent of the Standard & Poor's 500 index gain during 1987-1996 took place in just 10 of 120 months. And you're going to predict those months?

In the 1982-1987 bull market, all 1,276 days showed a 26.3 percent gain in the S&P 500. If you ignore the 10 best days, the gain was 18.3 percent. Minus the 18 best days, the gain was 13.1 percent. Without the 30 best days, the index climbed only 8.5 percent.

To successfully "time" the stock market, you must be right twice -- buying and selling -- and you pay commissions both ways.

Janet Lowe's new book, "Value Investing Made Easy," advises: "Buy stocks as though you're buying the whole company, paying little attention to market temperament or other short-term exterior forces."

TIMING TIDBITS: "Wall Street's graveyards are filled with men who were right too soon." ("1997 Stock Trader's Almanac.")

"Be on the right side of major moves, not in and out too often." (Martin Zweig.)

Pub Date: 2/12/97

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