Partly rebounding from sharp losses last week, during which bonds suffered their steepest weekly decline in five years, financial markets staged a brisk advance yesterday.
The Dow Jones industrial average gained 27.12 points to close at 4,668.67 and long-term Treasury bonds added about one point ($10 for a $1,000 bond) as the yield dropped to 6.87 percent.
WALL ST. WISDOM: "If a battered stock refuses to sink any lower no matter how many negative articles appear in the papers, that stock is worth a close look." (James L. Fraser, author, "The Contrary Investor")
DOW & CAL QUIZ: Do you know where the Dow Jones average stood on the day that Cal Ripken's unbroken "streak" began? For exact date and DJ, read on.
WHICH PAGE D'YA READ? "The Federal Reserve's rate-cut could push the Dow Jones average to 4,900 and postpone a recession." (Chartered financial analyst Michael Sivy in Money magazine, August) . . . "One of ace stock-picker Robert Marcin's trusted indicators signals that the Dow could tumble as much as 10 percent." (Same issue, Money)
WALL ST. WEEK: On "Wall Street Week With Louis Rukeyser" Friday: "The market dive was not unexpected, and we're still in a 'bull' phase." (Michael Holland) . . . "Unlike in 1987, the market's not overvalued but earnings setbacks could hit specific stocks. Corrections are buying opportunities. High-techs still OK if inflation stays low." (Mary Farrell) . . . "Stocks still have a good run left; I like Dover and Textron." (Maceo Sloan)
GUEST CORNER: Wall Street Week guest Lawrence Auriana, co-portfolio manager, the Kaufmann Fund (25 percent annual average gain in last three years) said, "We successfully buy initial public offerings -- new issues -- only after studying the prospectus carefully, especially sections on risk, but the average investor should buy IPOs only through mutual funds. . . . We look for companies growing at least 25 percent a year. . . . My favorite stock now is Borders Group."
BGE BOOSTED: "Rumors are surfacing again that BGE will merge with Potomac Electric Power, a merger that would convince local analyst Alex Hart to upgrade BGE to a buy.
"Also in the stock's favor, BGE's 78 percent dividend payout ratio is lower than the national average.
"At 6.3 percent, the stock's yield is only 0.3 percentage points lower than the 30-year Treasury bond's return." (Financial World, Aug. 1)
LOWEST LOCAL RATES: The leading borrowing deals in Baltimore, according to HSH Associates of Butler, N.J., are: Fixed-rate 30-year loan, Signet Mortgage, 7.25 percent, 5 percent down, 2.38 points. One-year adjustable: Heritage Savings, 4.75 percent, 10 percent down, 3 points, 6 percent cap. Car loan: Baltimore County Savings, 8 percent, 10 percent down, 60 months.
WHERE WE STAND: Baltimore ranks No. 14 under "How 24 U.S. Cities Ranked For Second Quarter Stock Performance," as surveyed by Nordby Cities Index. Our city's stocks were up 7.7 percent vs. No. 1 Boston's 16.6 percent. Miami trailed at a 0.2 percent gain. The average city gained 9.3 percent.
QUIZ ANSWER: On Sunday, May 30, 1982, the day Cal Ripken's consecutive streak began (he was playing third base then), the Dow Jones industrial average stood at 819.54. The Dow has more than quintupled since that weekend. Stated another way, $1,000 invested in the 30 Dow industrials 13 years ago would now be worth about $5,660.
HOPEFULLY HELPFUL: Under "Four Fears of Retirement" in Business Week, July 24, we find: "Outliving your savings, losing investments, inflation and catastrophic illness." Remedies: "Plan for you and spouse to live until age 90. Use software or financial planner to help. . . . Buy U.S. Treasuries for the short-term, growth stocks for long-term. . . . Work with an elder-care lawyer to divest most assets that would go to a nursing home in case of serious illness."
JULY JOURNAL: "Morningstar's Mutual Fund Guides Are on The Rise As the Stock Market Soars," says a helpful story in the current (July 24) U.S. News & World Report. The article tells how and where to buy, use and subscribe to this valuable publication ($395 a year).
"Flat tax won't become a reality until after the 1996 elections, but investors should educate themselves about it because the tax would have a major impact on personal tax bills. Main thrust of the flat tax: eliminate taxes on interest, dividends, capital gains -- good for investors." (Tax Hotline, July)
NOTES & QUOTES: On the local honor roll we find T. Rowe Price European Stock Fund under "Overseas Six-Month Winners" and the firm's Science & Technology Fund under "Six-Month and Five-Year Winners" in Money magazine's "Comprehensive Midyear Mutual Fund" August cover story listings.
"Stay with technology stocks; this wave has a long, long way to go." (Lee Kopp, investment adviser, in the new Business Week, July 31)
LAST LINES: "Thanks to corporate America's profit surge, the first half of 1995 had the highest number of dividend increases (930) since 1981's first half." (Standard & Poor's)
Which way interest rates now? This week's Barron's (July 24) says, "The bond market faces treacherous weeks ahead with heavy Treasury borrowing, starting with this week's $29 billion auctions of 2- and 5-year notes.
"Many people don't realize how long a bear market can last.
"If you loaded up on stocks in early 1973 you weren't even until 1983. Those who bought in September 1929 were under water until 1954." (Chartist Mutual Fund Timer)
"A 401(k) pension plan cuts your tax bill, forces you to save for retirement and can even boost your salary somewhat." (Consumer Reports, August)