Profit-taking pushes Dow down 18


Although interest rates declined again -- the 30-year government bond yield slipped to 5.86 percent -- profit-taking hit the stock market again yesterday. The Dow Jones industrial average broke below 3,600, falling 18.17 points to close at 3,586.93.

WORDS OF WISDOM: "Behold, there come seven years of great plenty throughout all the land of Egypt; and there shall arise after them seven years of famine." (Genesis, 41:29-30) . . . "Some day, no one can tell when, there will be another speculative climax and crash. There is no chance that, as the market moves to the brink, those involved will see the nature of their illusion and so protect themselves." ("The Great Crash, 1929," by John Kenneth Galbraith.)

ANOTHER WARNING: "For shareholders, a bigger dividend check is the good news that grew rare in the early 1990s. But in August, 116 companies announced higher dividend payouts, 30 percent more than in 1992 and 61 percent more than in 1991. Arnold Kaufman, editor, S&P; Outlook, says, 'Dividend improvement is critical at this stage of the market, with stock valuations so high,' adding that the dividend yield on the S&P; 500 fell to 2.71 percent last week, just above record lows of 2.64 percent, set in August, 1987, and 2.65 percent in January, 1973. In both cases, the stock market tumbled." (New York Times, Sept. 3.)

MORE ON DIVIDENDS: Speaking of dividends, Barron's, dated Sept. 6, on newsstands this week, runs, "Pretty Payouts: Solid Stocks That Yield More Than 5 Percent" with an accompanying chart listing American Brands, Arco Chemical, Bristol-Myers Squibb, Chemed, Great Western Financial, Eli Lilly, Marion Merrill Dow, Ogden, Olin, Philip Morris, Sun, Syntex and Upjohn. But the final paragraph warns, "I.B.M. continued to pay a large dividend in late 1992 without profits to back it up. This produced a mirage as investors bought shares feeling the dividend was sacred, only to have IBM finally bow to reality and slash its payout 80 percent. The effect on Big Blue's price was devastating."

MARYLAND MEMOS: T. Rowe Price mutual funds are written up in Kiplinger's Personal Finance magazine, October, under "Finding the Right Fund Family." Excerpt: "Spokesman Steven Norwitz says, 'We don't dominate the performance rankings because we manage our funds to control risk. We're not, as a philosophy, trying to be in the top ten.' " . . . The Calvert Group of Social Investment Funds, Bethesda ([301] 951-4800), is discussed at length in the same magazine under the title, "Clean Money: Social Investing." (Excerpt: "If a company is doing business in South Africa or if more than 10 percent of sales is in weapons, we don't buy it.") . . . "Graybeard investors may remember that GE and Westinghouse once competed in price as well as product. As late as November, 1986, GE was a $40 stock, Westinghouse $30. Today, GE flirts with $100 while its competitor hopes to move up from $15 to $20. Happily, I see a chance of its doing so." (Laszlo Birinyi, financial consultant.)

BALTIMORE & BEYOND: Legg Mason (539-3400) will mail its September "Investor's Dozen," including Black & Decker, Bristol-Myers Squibb, Dial Corp., Harcourt General, Mattel, MCI Communications, Monsanto, Newell, Rust International, Schering-Plough, Service Corporation Int'l. and Shawmut National Bank . . . Quick & Reilly ([410] 685-6210) will mail "200 NYSE Stocks That Boost Dividends Every Year." Examples are American Home Products, Coca-Cola, General Mills, Gillette, Hartford Steam Boiler, Martin Marietta, Merck, Potomac Electric Power, Rochester Telephone . . . "The best place for money now is in overseas stocks. Foreign stocks are up about 30 percent this year and this uptrend will continue. I like Europe best, than Japan." (Howard "Pete" Colhoun, Baltimore-based adviser.)

LOOKING AHEAD: "As a technician, I like American Express, the Baby Bells and Citibank. I'm not crazy about gold." (Ralph Acampora) . . . "It won't take more than a slight uptick in interest rates or a mild case of October phobia to turn this bull market upside down. The risk of excess caution now is only a lost opportunity, and investors know that opportunity always comes around again in the stock market -- but lost capital does not." (Investech Market Analyst) . . . "Closed-end 'country funds' have become expensive after extremely strong run-ups. The premium/discount structure is the most unfavorable for some time." (Closed-End Country Fund Report) . . . "The market is in a cyclical topping process that could lead to an intermediate decline of 6-10 percent." (Institutional Monitor) . . . "Stepped-up inflation may be a bit in the future, but it's not too soon to switch from long-term bonds to the relative safety of short-term bonds." (Ben Weberman in Forbes, Sept. 13) . . . "If the recent rally broadens and gets the market to new highs, the Dow industrials should surpass 3,700 in two weeks. If the rally doesn't broaden, a short-lived 5 percent decline would not be surprising." (Core Commentary.)

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