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Thursday, Mar 28, 2024
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Finance—Bull or bear? Analysts can’t quite agree



Fallbrook National Bank Changes Its Name

To Community National

The stock market has been trading in a narrow range the past year and is getting ready to take a plunge because many stock prices are too high, one local investment newsletter editor contends.

“We’ve had so many years , since the early 1980s , of a continuous bull market. At some point we need some kind of a correction, a blood-letting if you will, to correct the excesses of the marketplace,” said G. Linus Weiss, editor of La Jolla-based Investment Quality Trends.

The investment formulas he uses indicate dividends are at an historic low. Currently, the Dow Jones Industrial Average composite dividend yield is 1.5 percent, he said. Weiss considers a 3 percent dividend yield on the Dow to be an indication of fair value.

Thus, Dow stock prices need to drop by 50 percent to restore a reasonable dividend, he said.

Weiss does, however, see promise in oil stocks, utility companies and banks. That’s because they are currently valued by the market at realistic multiples of their annual earnings, he said.

However, another stock market newsletter editor, Bud Leedom of the San Diego Stock Report, said the market correction has just about run its course and a buying opportunity may soon arise.

“After such a big increase in prices last year, a correction was inevitable,” Leedom said. “But I see a new technological revolution, much like the industrial revolution of the 19th century, driving profits higher as business and industry become more productive and efficient.”

It’s possible interest rate increases by the U.S. Federal Reserve Bank may cut deeper into stock values than they have already, Leedom said. However, technology that increases productivity will continue to be in demand and increase the stock prices of companies with those products.

“Telecommunications companies like Qualcomm Inc. will continue to be leaders,” Leedom said.

He also likes the stocks of Applied Micro Circuits Corp., Aurora Bioscience Corp. and Trega Biosciences Inc. All are San Diego-based.

– – –

Bank Notes: Fallbrook National Bank has changed its name to Community National Bank. Point Loma Credit Union has opened a new branch office in National City. Escondido-based Realty Income Corp. has set up a Web site loaded with general financial information and links to other financial Web sites at (www.realtyincome.com). … ITLACapital Corp. of La Jolla has issued $14 million in 10.6 percent capital securities. Bank of America donated $100,000 to the San Diego-based Local Initiative Support Corp. Southwest Community Bank of Encinitas earned its second consecutive four-star rating for quality from Bauerfinancial Reports Inc., a bank rating service.

Submit financial news for this column via E-mail to agrupe@sdbj.com.

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