Following the dollar and bonds downhill, Wall Street snapped its four-day winning streak yesterday. As 30-year government bonds fell almost one full point, the Dow Jones industrial average declined 22.20 points to close at 3,839.49. The Mexican peso stabilized, recovering about 10 percent after its recent dive.
HOLIDAY HASH: Under "After the Nov. 8 Election: What's In," Business Week, Dec. 26, lists in its financial category: Two-year Treasury notes, certified public accountants, tax cuts and IRAs. Under "What's Out," we see derivatives, Japan, Orange County and tax preparation software. . . . Through Nov. 30, here is how various investment categories performed, with "Worst Year Since" in parentheses: Large company U.S. stocks off 1.1 percent (1990); small-company U.S. stocks down 0.1 percent (1990); long-term U.S. government bonds minus 9.1 percent (1967); intermediate-term U.S. government bonds off 5.3 percent no misprint) and U.S. Treasury bills up 3.7 percent. (Data from Ibbotson Associates)
HOPEFULLY HELPFUL: "It's downright foolish for a person to refuse to invest in a nondeductible IRA. IRAs, deductible or not, offer unlimited investment choices, the profits from which accumulate tax-free until withdrawal. Here's the arithmetic: Outside of an IRA, $2,000 invested every year for 20 years, earning 7 percent annually, will grow to $61,000 after taxes of 45 percent. A $2,000 annual IRA investment over the same period will have grown to $66,000 after taxes are paid and the funds withdrawn. Not a bad spread for doing nothing but changing the nature of the account." (Financial World, Jan. 3)
YEAR-END SCORECARD: Here are "bests" and "worsts" through Dec. 9: Best NYSE stock: United Inns, up sharply thanks to a takeover; Worst NYSE stock: House of Fabrics, plagued by severe losses and two failed restructuring offers; Best AMEX stock: Simula, maker of air bags and other crash-safety products; Worst AMEX stock: SpectraVision, nation's largest provider of pay-per-view entertainment to hotels; Best OTC stock: Proxima; Worst OTC stock: Media Vision Technology; Best stock group: athletic shoes; Worst stock group: homebuilding, which collapsed largely because of sharply rising interest rates.
BETTER HURRY!: "The last days of December are ideal for saving big tax bucks," says Working Woman magazine, December, adding, "Do these things before year-end: Prepay real estate taxes and make your January mortgage payment now, to get the 1994 deduction . . . Pay your Jan. 15, 1995, Maryland income tax installment in December . . . If you're self-employed, bunch expenses and wait till January to bill clients . . . Quickly review your investments (again) to see if you wish to dump last-minute 'losers' and take a tax-saving capital loss . . . Use up all the money in your dependent-care and health-care reimbursement accounts at work. Money left at year-end must be forfeited."
FREE STATE FILE: I. W. "Tubby" Burnham, 85, a former Baltimorean and founder of Burnham & Co., which later evolved into Drexel Burnham Lambert, is quoted in Financial World, Jan. 3: "Many people are wisely scooping up utility stocks that don't figure to get hurt by deregulation and also show good earnings and dividend growth. Once this thing stabilizes, utilities will be pretty good performers. If you're careful, they're pretty riskless." . . . Local financial planner Mark Dyer says, "Every time you send money to reduce your mortgage, it's like investing money at that rate. If you have a 9 percent mortgage, paying it down is almost like investing at 9 percent, which is hard to do safely these days." He adds, "And don't let tax deductions stop you from prepaying that mortgage."
MORE ON MARYLAND: In charts titled "A Menu of Investment Opportunities," Business Week, Dec. 26, lists Crown Central Petroleum under "Stocks Selling Way Below Book Value" and includes Potomac Electric Power (yielding 8.9 percent) under "Companies With the Highest Yield." Bethlehem Steel appears under "High Hopes for Earnings Growth in 1995." . . . Tomorrow night, locally produced "Wall Street Week With Louis Rukeyser" holds its 24th annual "Year End Review," with top stock-picking panelists Laszlo Birinyi, Harvey Eisen, James Grant and Baltimore investment adviser Eddie Brown . . . Baltimore Gas & Electric stock appears under "Average to Above-Average Business Positions" in Legg Mason's Dec. 20 "Utility In come Buy List." BGE currently yields 6.9 percent.
FAMOUS LAST WORDS: "We do have a different strategy from most counties, but we are aggressive within prudent limits." (Robert Citron, treasurer, Orange County, Calif., earlier this year, before his fund lost about $2 billion in derivatives and other leveraged financial ventures.) Data from Barron's, Dec. 26.
YEAR-ENDERS: "We learn from our mistakes and the amount we learn is in direct proportion to the amount we suffer from having made the mistakes." (Football coach Tommy Prothro) . . . "Treasury bond yields are about 5 percentage points higher than today's inflation rate." (Business Week) . . . "There are safe ways to invest in municipal bonds -- despite the chill in tax-exempt securities following the Orange County bankruptcy. Stick with AA general obligation bonds sold by states and cities or pre-refunded municipals backed by the federal government." (James Lynch, editor, "Lynch Municipal Bond Advisory") . . . Coming Tuesday: Winners and runners-up in our annual Ticker Dow Jones forecasting contest.