Apprehensive about the NAFTA vote tomorrow -- the trade agreement is considered encouraging for business and the stock market -- investors nudged the Dow Jones industrial average lower yesterday. At the closing bell, the blue-chip indicator had slipped 6.99 points, closing at 3,677.52.
AND NOW WHERE? "If NAFTA doesn't pass, we'll get a down market for a few days." (Frank Cappiello) . . . "Low interest rates have lulled the majority into a dangerous complacency, believing that stocks can't go down. Go back through market history; every single important top was prefaced by widespread opinion that stocks could not go down. Just when cash looks like the last thing you'd want, cash will become king." (Granville Market Letter) . . . "We remain bullish on the market. More than $110 billion in CDs mature this month, and a healthy portion of this could find a home in stocks." (Daily Trader) . . . "A new equity-type product is created almost daily. These 'defense mechanisms' are developed by Wall Street to transfer risk. This is like rearranging the deck chairs on the Titanic." (Ian McAvity, Deliberations) . . . "With interest rates still declining and inflationary pressures subsiding, there's little danger of a major market top." (Major Trends.) . . . "When I have to depend on hope in a trade, I get out of it." (Jesse Livermore, successful trader many years ago.)
BALTIMORE BEAT: Want to know more about how President Clinton's health care plan will affect your investments? Call Legg Mason (539-3400) for "Quarterly Health Care Monitor." ("Some companies that would benefit from the proposals include leading multinational pharmaceutical companies with strong research pipelines such as Bristol-Myers Squibb, Merck, Pfizer and Schering Plough.") . . . Investment Counselors of Maryland's CEO Craig Lewis says, "We are often asked about the valuation level of the stock market in terms of historic parameters, such as price-earnings ratios and dividend yields. While P/E ratios are high and yields low in absolute terms, they are not out of line in a relative sense. P/E ratios tend to be higher in low inflation periods, and the 16.5 P/E ratio now is consistent with 3.5 percent inflation."
MARYLAND MEMOS: "After more than a year of unchanged monetary policy, the Federal Reserve is likely to begin a gradual process of raising money market interest rates in 1994. Thus, we do not envision taking an aggressive stance in the fixed income markets, and believe the opportunity to lock in higher yields will present itself. Regarding Wall Street, the environment should favor stocks whose earnings prospects are most tied to the economy." (Leslie B. Disharoon, chairman, Mercantile Safe Deposit & Trust Funds Inc.) . . . Stocks with local connections reaching 12-month highs recently include Atlantafed Bancorp, CSX, Cosmetic Center, General Motors and Procter & Gamble. "Sun Stocks" reaching 12-month highs are identified with the letter 'u' before their "High" listings, stocks sinking to yearly lows have a little 'd' next to their "Low" prices . . . T. Rowe Price Free High Yield Fund is listed under "Top-Performing Bond Mutual Funds" in Kiplinger's Personal Finance Magazine, December.
HOPEFULLY HELPFUL: "Most mutual funds make capital-gains distributions in December, creating a tax trap for new investors. If you buy a fund prior to a large capital-gain distribution, you incur a substantial tax liability. Before investing, check the fund of your choice or your broker." (Mutual Fund Forecaster)
NOVEMBER NUGGETS: Sister Gwynette, director of Our Daily Bread soup kitchen (411 Cathedral St., Baltimore 21201) told me Friday, "We're now feeding over 900 men, women and children daily, 365 days a year. We need peanut butter, coffee, hot and cold cereal, sugar, sandwich bags -- and money!" . . . "Don't be lazy in your 401(k) plan investments. Too many people take the easy route and stick it in an investment that requires the least mental energy. Lobby your employer for more investment options, not just low-yielding fixed-income areas." (Ted Benna, benefits consultant) . . . In response to a reader's request, here are market milestones: The Dow Jones industrial average first hit 1,000 in 1972, 2,000 in 1987 and 3,000 in 1991 . . . Stock of Bethlehem Steel, of interest to many Baltimoreans, is rated a "Buy" in "Burke's Portfolio Follow-Up" in Moneypaper, November . . . "If you have at least $50,000 to invest, it may be worthwhile to buy foreign stocks directly instead of through American depository receipts (ADRs) or closed-end mutual funds. Today the action is in emerging markets such as Poland, up 550 percent from March to September 1993, and Jamaica, up 200 percent in 1992." (Barron's)