Newspaper article THE JOURNAL RECORD

Market Seesaw Is a Balancing Act

Newspaper article THE JOURNAL RECORD

Market Seesaw Is a Balancing Act

Article excerpt

NEW YORK -- If fretting about the gyrations of the securities markets is starting to wear on your nerves, sit back for a moment and think about the positive things the Wall Street tumult is accomplishing.

Interest rates are coming down, lowering the cost of borrowing for everybody from individual home buyers to the federal government. The speculative fever so many commentators worried about in stocks has cooled considerably.

Dividend yields sank too low? Well, now they're moving up. Whoever was operating under the delusion that they couldn't lose in stock investments can't make that reckless presumption anymore. Admittedly, this happy talk is small consolation to somebody who bought Citicorp stock for $180 a few months ago and now sees it trading for $95. Or to investors who have experienced a 20 percent to 50 percent contraction in the value of their Asian, or Latin American, or emerging markets, or small-company growth funds. More than a few observers argue that the corrective process is far from over. For example, a stock like Amazon.com, whose price rests entirely on hopes for the future rather than any present earnings or dividends, still trades at more than five times its 12-month low. Norman Fosback, editor of the advisory letter Market Logic, says a price-earnings ratio for blue chip stocks that has come down only from 30 to 1 to 27 to 1 or so still looks perilously high. "We expect the market slide has further to go, both in magnitude and duration," Fosback writes. "But happily, the first portents of the next upleg are beginning to emerge." For one thing, Fosback notes, corporate insiders -- top executives, directors and major owners -- "have gone on a buying spree -- in fact, they are now buying at the heaviest rate since the market lows in late 1987 and late 1990." In a related, and especially telling development, partners at one of Wall Street's most respected investment banks, Goldman Sachs, have put off plans for a public offering of stock. …

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