The Daily Dow FOOL GLOBAL WIRE by Robert Sheard (TMF Sheard) LEXINGTON, KY. (May 1, 1997) -- Rumors are flying fast and furiously that the White House and Congressional leaders are close to announcing a framework for a balanced federal budget by 2002. The bond market, of course, loves the prospect, which would theoretically mean lower interest rates. But after several days of strong gains and some nervousness about snags that may still lie ahead in the budget process, blue chips took a step backwards today. This is the first day in some time that the Dow dropped while the Nasdaq Composite rose. Among the many considerations concerning Wall Street in the budget talks is the fate of capital gains taxes. President Clinton has publicly declared support for a cut or elimination of capital gains taxes on home sales, but the issue of capital gains on stocks is still very much up in the air. The Republicans, however, are pushing for a broad-based capital gains tax reduction. For stock investors, such a decision can have a significant impact on our portfolio strategies. If long-term cap gains taxes drop to 15% or 18% (numbers rumored to be possibilities), a strategy like the Dow Dividend Approach becomes that much more attractive. The gap between a long-term maximum rate of 15% and a maximum ordinary tax rate of nearly 40% is enormous, and makes the necessity for solid long-term approaches even more essential. If one takes the historical average return for the Foolish Four of 23% and cut it by the current maximum long-term tax rate of 28%, the after-tax return is 16.5%. If the tax rate drops to 15%, that after-tax rate climbs to 19.5%. Compound that 3% difference over 20 years, starting, say with $25,000, and the difference between the two portfolios is more than $45,000. That's an extra $45,000 in your pocket rather than Uncle Sam's, on precisely the same series of investments with the same initial capital. We should know in the next day or so what precisely is being proposed. But it's an issue very much at the heart of long-term investing gains. For more on long-term strategies, take a look at today's classic fribble reprinting, my Workshop report, and Tom Gardner's report later this evening on the Fool Portfolio. (c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. ________________________________

The Current BTD 10 AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:T)") else Response.Write("(NYSE:T)") end if %> *Philip Morris <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MO)") else Response.Write("(NYSE:MO)") end if %> *Intl. Paper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:IP)") else Response.Write("(NYSE:IP)") end if %> *Exxon <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:XON)") else Response.Write("(NYSE:XON)") end if %> *General Motors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:GM)") else Response.Write("(NYSE:GM)") end if %> Chevron <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CHV)") else Response.Write("(NYSE:CHV)") end if %> Eastman Kodak <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:EK)") else Response.Write("(NYSE:EK)") end if %> Minnesota Mining <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MMM)") else Response.Write("(NYSE:MMM)") end if %> J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:JPM)") else Response.Write("(NYSE:JPM)") end if %> DuPont <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:DD)") else Response.Write("(NYSE:DD)") end if %> NOTE: Foolish four stocks are preceded by an asterisk. Updated Daily

1997 Foolish Four Model Stock Change Last -------------------- T + 1/2 34.00 GM - 3/8 57.50 CHV - 1/2 68.00 MMM + 1/8 87.13 Day Month Year FOOL-4 +0.23% 0.23% -4.26% DJIA -0.46% -0.46% 8.19% S&P 500 -0.35% -0.35% 7.80% NASDAQ +0.77% 0.77% -1.59% Rec'd # Security In At Now Change 1/2/97 120 3M 83.00 87.13 4.97% 1/2/97 153 Chevron 65.00 68.00 4.62% 1/2/97 179 Gen. Motor 55.75 57.50 3.14% 1/2/97 479 AT&T 41.75 34.00 -18.56% Rec'd # Security In At Value Change 1/2/97 120 3M 9960.00 10455.00 $495.00 1/2/97 153 Chevron 9945.00 10404.00 $459.00 1/2/97 179 Gen. Motor 9979.25 10292.50 $313.25 1/2/97 479 AT&T 19998.25 16286.00 -$3712.25 CASH $431.29 TOTAL $47868.79

© Copyright 1995-2000, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. The Motley Fool is a registered trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us