If the bull market dies in 1997, inflation will be likely suspect


TODAY, we look both backward and ahead for clues to investment success.

Every re-elected president since Andrew Jackson in 1832, except Ronald Reagan, witnessed a stock decline the next year. A 49 percent plunge followed Franklin Delano Roosevelt's 1936 second-term victory. Richard Nixon presided over a 45 percent drop.

But history shows that most bull markets are killed by inflation, rising interest rates and earnings declines. Happily, we have none of those today. And the Dow Jones price-to-earnings ratio stands at a reasonable 18.

In addition, baby boomers are putting more money in stocks than ever.

I like the advice of Robert Merritt, who wrote in "Financial Independence Through Common Stocks": "The best results come from buying high quality stocks and holding them through thick and thin over extended periods of time."

Among local stocks, Accustaff, parent of Baltimore-based Attorneys Per Diem, appears in the article, "100 Best-Performing 1996 Stocks," in Bloomberg Personal Magazine, January-February issue. The stock shows a 260 percent one-year total return.

Although Black & Decker stock plunged $7.25 last week after a sour profit forecast, Barron's says: "Robert Sanborn, Oakmark Fund's top-performing manager, calls this 'an overreaction' and he's still positive about B&D;'s future."

Where do you invest now? Martin Sosnoff, with a strong record, says in Forbes, Dec. 30, that he favors American International Group, Citicorp, FNMA, Eli Lilly and Exxon. He likes blue chips with relatively low price-to-earnings ratios.

Standard & Poor's 1997 Forecast lists under "Industries With Superior Potential": banks, computer-related areas, food, energy, health care and real estate investment trusts.

Kiplinger's January "1997 Forecast Issue" recommends "jolted energy stocks," "revived retailers," foreign stocks, banks and international mutual funds.

The Kiplinger cover voices this cheerful note: "If the Dow Jones industrials grow at an average 10 percent rate per year, the Dow average will reach the neighborhood of 700,000 by 2047."

RTC WANT MORE INCOME? If you need more income, here's good news: November's 239 dividend increases set a 15-year record; they were up the most since February 1981. Despite talk about dividends losing appeal, higher payouts are more popular than ever.

QUICK ADVICE: "Buy a stock the way you would buy a house. Like it so much you'd be content to own it no matter what the market does." (Warren Buffett.)

"Always sell what shows you a loss and keep what shows you a profit." (Jesse Livermore, highly successful investor.)

"By systematically setting aside even a small amount of money each week, each payday or each month, over time you'll have accumulated a significant nest egg." ("Get Rich Slow.")

Pub Date: 12/20/96

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