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Rate concerns still rule stock market


Fearing that the Federal Reserve might not reduce interest rates after yesterday's report of stronger-than-expected existing home sales in May, investors lost some enthusiasm for stocks.

The Dow Jones industrial average declined 34.59 points yesterday to close at 4,551.25. Long bond prices slipped about five-eighths of a point.

LOOKING BOTH WAYS: "From here we'll certainly have a 'consolidation correction' because we haven't had a 10 percent setback in the longest period in stock market history." (Jim Rogers, highly successful investor, in Barron's (June 26) "Market Masters Midyear Roundtable," on newsstands this week.

HARD TO BELIEVE: "There's hardly a money management professional who beat the major stock-market indexes this year. Out of 1,731 domestic stock mutual funds, only 124 beat the 17.5 percent leap in Standard & Poor's 500-stock index for the five months through May." (Morningstar Inc. via the Wall Street Journal.)

MIDWEEK QUIZ: (1) True or false? Anyone who earns money can contribute to an IRA account, allowing his or her wages to be excluded from taxable income. (2) Which of these is best for the largest immediate death benefit for the lowest premium: Whole life; term; universal life; variable life? (3) True or false? You are safer if you buy a mutual fund from a bank than from a brokerage firm. (For answers, read on.)

SUMMER SHOCKER: New figures show that if you had invested $10,000 in the "Dow 5" strategy in 1973, you would now have $714,510 (up from $660,000 earlier this year), a compound growth rate of 20.6 percent. To begin, buy the five lowest-priced of the 10 highest-yielding Dow Jones 30 industrial stocks and rearrange them each year if necessary. The present Dow 5 are Chevron, Eastman Kodak, Minnesota Mining, General Electric and Sears.

MORE GOODIES: In response to several requests, we re-print these figures from Money magazine, April. "If you put $25 a week into stocks that gain 10 percent a year (just under the 10.2 percent average annual return for stocks over the past 69 years), you'll have more than $103,000 in 22 years."

LOCAL LINE: Procter & Gamble, widely held in this area, appears under "Core Stocks for Long-Term Capital Appreciation" in S&P;'s Midyear Forecast, June 21.

T. Rowe Price International Stock Fund is listed in the same S&P; Forecast under "Recommended Mutual Funds."

Martin Zweig and William Gross, panelists on "Wall Street Week With Louis Rukeyser," are profiled in Financial World, July 4, under "Wall Street's Highest Paid 100." Mr. Zweig made "at least $20 million" last year, Mr. Gross $10 million.

HOPEFULLY HELPFUL: Tip for salesmen and women: "When someone is no longer anxious to do better, that person is done for." (Bits & Pieces.)

In that regard, figures show that most stockbrokers lose 20 percent of their customers each year -- clients die, move away, become unhappy, etc. -- forcing successful brokers to bring in many new customers annually.

"Putting your house in a personal residence trust for your kids -- enabling you to live there but getting the house out of your taxable estate -- is a useful estate planning device." (Financial World, July 4, which has all the details.)

QUIZ ANSWERS: (1) True, although not everyone can deduct his or her contribution from income taxes. See your tax person for details. (2) Term insurance. However, term policies pay only a basic death benefit, whereas whole life and universal life build cash value in addition to death benefits. (3) False. Unlike bank deposits, mutual funds sold through banks are not insured. (Neither, of course, are funds sold through brokerages.)

GETTING A RAISE (cont'd): "The best way to get a raise, rather than pleading for more money for your kids' braces, college tuition, etc., is to plan in advance. Ask your boss what you can do to earn more money next time around. Then volunteer for what the company needs most." (Fortune, June 26.)

MONEY SAVER: "If you're overseas and need local currency, your first thought is to go to an exchange bureau or ATM. Better source: Your hotel. Ask for local cash and have it charged to your room bill. You'll pay with your credit card, thereby avoiding hefty ATM and exchange bureau fees." (Men's Health, July/August.)

TAX TIP: "If you rent out your home or vacation home to others for 14 days or less during the year, the rent you receive is completely tax free -- you don't even have to report it on your tax return." (Tax Hotline, June.)

TIGHTWAD TOPICS: "If you need encyclopedias, check your local library. Most libraries buy a new set every year, selling an oldie at the same time. One reader bought a 5-year-old set for $20. . . . Give homemade candies for gifts. For packaging, buy 50 Chinese food containers for $3, or 6 cents each vs. Hallmark's 69 cents price." (Tightwad Gazette, June.)

WALL ST. WATCH: "Sun Stocks" reaching 12-month highs recently include Allied Irish (parent of First National Bank), Becton Dickinson, Bell Atlantic, Columbia Gas, Legg Mason, Life Technologies, Martek Biosciences, PHH Corp., Procter & Gamble and Westinghouse.

"Investor sentiment is not strongly bullish, just less skeptical than it was. So we're not near a top." (Kenneth Fisher, in Forbes, July 3.)

"I'm extremely bullish on the high-techs like Motorola, Texas Instruments and Intel." (Jeffrey Vinik, Fidelity Magellan Fund's portfolio manager. Under Mr. Vinik, Magellan had a 53 percent total return from June 30, 1992 to May 31, 1995.

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