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GROWING MONEY BASE IS LIKELY TO PUSH INTEREST RATES HIGHER

SHARE GROWING MONEY BASE IS LIKELY TO PUSH INTEREST RATES HIGHER

Interest rates may continue higher for two reasons, says Laloggia's Special Situations Report (P.O. Box 167, Rochester, N.Y. 14601). "First, the monetary base continues to grow at a 10 percent annual rate. Second, commercial and industrial loan demand is rising sharply. For stocks, this translates into a major bear market, and any interruptions along the way should be viewed as interruptions in a major downtrend."

- FAM Value Fund likes its stocks cheap, usually 12 times projected earnings or less. It follows other strict value criteria, too: high total return on capital, low debt and a market price at or below book value. This stinginess has produced 11.8 percent average annual gains over the past five years, more than 25 percent higher than the average fund. Favorite stocks: Fourth Financial, Onbancorp, CR Bard, Salomon, NWNL, Fund American Ent. Holding, Intercargo, First Colony.- "Investors realize they'll need a greater source of rising income to retire in dignity," notes Perrin Long of First Michigan brokerage. "So they will be increasingly investing in mutual funds." That will be good for the mutual fund management stocks. Another plus: the wave of takeovers currently affecting the industry. Six takeover candidates among the fund stocks, all selling below the market multiple: Alliance Capital, Colonial Group A, Eaton Vance, Franklin Resources, John Nuveen and T. Rowe Price.

- Investing in companies with rising dividends has always been a profitable strategy. To identify the best among them, the Minneapolis-based brokerage firm Piper Jaffray recently went looking among its favorite stocks for: 1) five-year annual dividend growth of at least 10 percent; 2) five-year annual total return of at least 10 percent; 3) current yield of at least 2 percent. It found 39 candidates. Eight had five-year dividend growth rates over 18 percent: Bemis, H&R Block, FNMA, Gerber, Kimberly-Clarke, Merck, Schering-Plough, WMX Technologies.

- It's a good idea to avoid all bonds when interest rates are rising, as they are today. It's a particularly good idea to avoid zero-coupon bonds, advises Income Fund Outlook (3471 N. Federal, Fort Lauderdale, Fla. 33306). "Zero-coupons offer no current return to investors. So any change in market yield can only be transmitted into their prices. As a result, zero-coupon bond prices can rise and fall with amazing swiftness."

- Salesmen from investment houses are about to begin selling gold door-to-door in Japan, reports Growth Stock Outlook (P.O. Box 15381, Chevy Chase, Md. 20825). "This could create considerable demand for gold bullion throughout Japan. Our guess is that the rising worldwide demand for gold, not the immediate threat of inflation, is driving the gold market. Add galloping inflation in China to gold demand there, and the price might go through the roof."

- Mutual funds have been paying dearly for earnings lately. But the stocks in their portfolios have been earning a lot, too. Here, according to Morningstar Mutuals (225 W. Wacker Drive, Chicago, Ill. 60606), are the funds with the highest five-year earnings growth rates, along with the average price-earnings ratio of their stocks: Fidelity Select Software & Computer (49.7 percent average growth rate; 25.1-1 p/e ratio), Keystone American Hartwell Emerging Growth (45.7 percent; 27.8-1), Hancock Special Equities A (44.9 percent; 31.1-1), Fortis Growth (43.1 percent; 30.2-1), ABT Emerging Growth (43.0 percent; 29.8-1).