The Daily Dow
Thursday, October 17, 1996
by Robert Sheard (MF DowMan)

LEXINGTON, KY. (October 17): Despite a second day of weakness in technology stocks, the Dow Jones Industrials climbed higher, setting another new record. A spate of economic data was released this morning (employment numbers, housing starts, factory usage) and all are suggesting that the economy has indeed slowed to a reasonable level to keep inflation in check.

In addition, various members of the Federal Reserve are making noises again that the government's inflation statistics actually over-state the real rate of inflation, making an already benign situation even rosier. Long bonds and blue chip stocks rose on the series of reports, closing up 38 points.

Our Foolish Four model portfolio was mixed on the day. CHEVRON was up slightly and DUPONTregained a point today. But KODAK and 3M remained stuck in neutral for the day.

If you watched the Gardners on CNBC last night, I want to correct a point or two about Brenda Buttner's insistence that this is a costly and high turnover approach. First of all, we don't advocate necessarily buying all ten "dogs of the Dow." The Foolish Four and Unemotional Value models hold half that number. And by doing it through a deep-discount broker, the trading costs are easily under $100 a year.

Also, the tax issue keeps coming up with this approach. Don't be fooled by those telling you that taxes kill this approach versus the Index funds. Buying and holding a stock or index fund forever does not, contrary to popular belief, avoid taxes. It simply defers them until the securities are sold, sometimes even creating a situation where the investor refuses to sell rather than take a tax hit, even though it's time to leave the stock.

By updating annually, even paying the yearly taxes as you go, your after-tax returns with this approach are better in the long run than deferring taxes in a buy-and-hold-forever investment with inferior returns.

Transmitted: 10/17/96

      THE FOOLISH FOUR MODEL (10/17/96)  

          Day    Week  Quarter  Year  History
Fool-4   0.30%   1.22%  5.14%  26.57%  26.57%
DJIA     0.64%   1.50%  3.01%  18.41%  18.41%
S&P 500  0.37%   0.90%  2.86%  14.78%  14.78%
NASDAQ  -0.72%  -0.51%  1.23%  18.04%  18.04%


Bought  #    Stock     In At   Now   Change

1/2/96  142  DuPont    69.88  95.88  37.21%
1/2/96  380  Chevron   52.38  66.88  27.68%
1/2/96  148  E. Kodak  67.00  78.63  17.35%
1/2/96  149  3M        63.76  72.13  13.12%
7/16/96  14  Imation   26.16  24.88  -4.90%

Bought  #    Stock          Cost       Value     Change

1/2/96  142  DuPont      $9,922.25  $13,614.25  $3,692.00    
1/2/96  380  Chevron    $19,902.50  $25,412.50  $5,510.00    
1/2/96  148  E. Kodak    $9,916.00  $11,636.50  $1,720.50    
1/2/96  149  3M          $9,500.09  $10,746.63  $1,246.53    
7/16/96  14  Imation       $366.21     $348.25    $(17.96)  

      CASH      $1,524.50      
      TOTAL    $63,282.63      





Transmitted: 10/17/96

      
      

      
      

        

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