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STOCK LETTER TAKES ITS MODEL PORTFOLIO TO 100 PERCENT CASH FOR 1ST TIME

A digest of investment opinion from the world's leading financial advisers

For the first time in its history, California Technology Stock Letter (1620 Montgomery St., Suite 200, San Francisco, CA 94111) has taken its Model Portfolio to 100 percent cash. CalTech, which has a superb record for calling market turns, has three reasons for predicting a "classic bear market": (1) It believes continuing strong retail sales preclude any cut in interest rates. (2) It suspects the bipartisan budget summit will produce no conclusive results. (3) It feels investor optimism has gotten out of hand.- If U.S. stocks falter, funds like G.T. European Growth will get even more attention. Since 1985, G.T. European has produced average annual returns of 27.9 percent, earning the maximum five-star rating of Mutual Fund Values in Chicago. G.T. European currently is 30 percent invested in West German stocks such as Deutsche Bank, Hoesch, Lufthansa, MAN, Mannesmann, Metallgesellschaft, Schering, Siemans and Thyssen. It's also bullish on two Portuguese equities, Banco Commercial Portugues and Engil.

- Stub stocks are created when a company recapitalizes and pays out a big cash dividend, which is usually heavily funded by debt. What's left is the equity portion of the highly leveraged company, the stub. Richard Haydon of McKinley Allsopp in New York has an excellent record for picking stub stocks. Last year his favorites doubled the general market's return. Some stubs Haydon now thinks are worth looking at: Holiday Corp., Ramada, Sealed Air and Service Merchandise.

- Stocks that have been under-performing for no apparent reason tend to weather bear markets best and to eventually benefit from bull markets when reason catches up with them. Indicator Digest (451 Grand Ave., Palisades Park, NJ 07650) recently screened 5,000 stocks looking for dividend-paying underperformers with below-market p/e ratios, solid balance sheets, modest price-to-book ratios (under 1.6) and positive five-year and one-year earnings growth. It found 40 but considers four particular bargains: National Presto, Quick & Reilly, Skyline and Starrett L.S.

- "Since last fall, the Fed has expanded the money supply from a 1 percent annual rate to 8 percent," notes Commmodity Information Systems (P.O. Box 690652, Houston, TX 77269-0652). "This newly generated liquidity should move into markets that are low-priced, in strong demand and international in character. The only markets now exhibiting these characteristics are food commodities. We strongly advise establishing long positions in selected food commodities before expanding liquidity pushes prices out of reach."

- The top real estate investment markets for the '90s were recently identified in an extensive nationwide survey of developers, elected officials, journalists and economic forecasters conducted by Century 21. The most promising areas: Buffalo, N.Y.; Charlotte, N.C.; Columbus, Ohio; Dallas/Fort Worth; Denver; Minneapolis/St. Paul; Orlando, Fla.; Seattle; Riverside/San Bernardino, Calif.; and Fort Myers/Cape Coral, Fla.

- For purposes of judging general stock market trends, "the Dow is our worst index," says Kenneth Fisher, author of "The Wall Street Waltz." "No one will ever build a price-weighted index like this again. It's dominated by events having little to do with the average moves of the stocks. And it contains only 30 stocks, all huge, and all cyclicals." Fisher recommends following the Value Line Composite Index instead. "It contains 1,700 of our most liquid issues, providing the best snapshot of the average American stock."

Investor's Notebook reflects the opinions of professionals. It does not endorse specific investments, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited. (C)1990 Universal Press Syndicate 4900 Main St., Kansas City, MO 64112