The recent rise in margin debt isn't as worrisome as some stock market bears believe, observes BankOne Economic Insight. "During the 10 years that had the fastest margin debt growth in history, the Dow Jones industrial average and the S&P 500 average gained 21.0 percent and 19.3 percent annually, respectively, compared to average annual rises of 8.8 percent and 9.5 percent from 1957 to present."
The average international stock fund has risen about 30 percent in the past year. Ivy European Opportunities Fund has gained more than 200 percent by focusing on hot IPOs and cheap rebound candidates that have the potential to grow beyond their home countries and compete on a regional and even global scale. Recent favorites: Norwegian telecom provider Emitel, Dutch food group Numico, Spanish fast-food chain Telepizza and Holland's VersaTel Telecom International.
The cost of online banking transactions averages $0.01, vs. $1.07 for transactions conducted in person. And since 1995, traditional banks have lost 18 percent of their deposits to online banks. Forrester Research forecasts that U.S. online banking households will grow from 2.4 million in 1997 to 18 million by 2002. Investors can exploit this development through Web site development stocks, says Individual Investor.com. Its two favorites: nFront and Security First Technologies.
High yields historically place a floor under falling stocks. And low valuations generally produce the biggest long-term profits. IBES recently found eight old-economy stocks that combine high-yield/cheap-price factors. All yield more than 4 percent, quadruple the market average, and have single-digit price-earnings ratios, less than half the market multiple. The eight: Crown Cork & Seal, CSX, Dana, Genuine Parts, Hercules, Louisiana Pacific, JC Penney, Tupperware.
I Bonds, U.S. Savings Bonds that have their yields adjusted for inflation, offer an attractive alternative to inflation-indexed Treasury bonds, says Investor's Business Daily. "Recently, these bonds paid 7.5 percent vs. 5.75 percent for regular Series EE Savings Bonds. With I Bonds, moreover, you won't owe any tax until you turn the bonds in. As long as you hold I bonds for at least five years, you'll receive the full yield; early redemptions forfeit three months' interest."
The gap between closed-end funds, which recently sold at historically high discounts to net-asset value, and exchange-traded funds, which often trade right at asset value because of their low expenses, has gotten way out of whack, says Thomas J. Herzfeld, a Miami money manager specializing in closed-end funds. Herzfeld recommends two closed-ends that are lowering expenses, buying back their own stock, and recently sold at 25 percent to 30 percent discounts: Chile Fund and Mexico Fund.
Smart Money magazine (1755 Broadway, New York, NY 10019) recently rated the 25 biggest discount brokers in seven separate categories: commissions and fees, ease and accuracy of trades, services, investment products, stock research, mutual funds and trouble avoidance. Here are the top 10, rated on a composite basis: TD Waterhouse, Muriel Siebert, Charles Schwab, DLJDirect, National Discount Brokers, Fidelity, ETrade, Mydiscountbroker, Scottrade, Merrill Lynch Direct.
Investor's Notebook is a digest of investment opinion from the world's leading financial advisers.