If 1987 was the Year of the Crash, 1988 is the Year of Cash.
Sales of certificates of deposit, Treasury securities, short-term bond mutual funds and other cash-equivalent investments soared this year as investors sought safe havens from the stock market.
Fortunately, however, that trend hasn't hurt investors. Although stocks have performed reasonably well this year, with the Dow Jones industrial average rising tk% through Friday, more conservative investments also have generally done well. Rising interest rates boosted yields on these and other short-term investments.
Investors also got some help from Washington. Lawmakers passed a Taxpayer Bill of Rights that will give taxpayers more protection against enforcement actions by the Internal Revenue Service. The government also passed tougher disclosure rules on home equity loans, credit cards, adjustable rate mortgages and mutual funds.
Nonetheless, the year is ending with some major question marks that threaten to make 1989 a rougher year. Investors have gotten uneasy with high-yield "junk bonds," worries are mounting over the massive U.S. trade and budget deficits and the dollar is weak. On top of that, the crisis in the savings and loan industry looks as if it could cost taxpayers more than $50 billion.
Here is a somewhat irreverent look at some of the other investment highlights--and lowlights--of 1988:
- Folks who fell off the Forbes 400 list of richest Americans. Twenty-two fell off because their stock holdings declined in the 1987 crash or through other calamities. Among the more familiar names of the fallen: Federal Express Chairman Fred Smith and Dart Group Chairman and corporate raider Herbert H. Haft.
- Stockholders of Financial Corp. of America. Some securities analysts recommended the stock last year on predictions that the ailing Irvine-based parent of American Savings would rebound from its mountain of bad loans and other woes. No such luck. Instead, FCA agreed to sell American Savings to Texas billionaire Robert M. Bass, making FCA a shell company whose stock became virtually worthless.
- Michael Milken. The junk bond king of Drexel Burnham Lambert already has lost some of his luster, thanks to a Securities and Exchange Commission civil suit filed this year charging him with insider trading and other securities sins. If the charges stick, he could lose much more.
Things That Went Up
- Home prices. Spurred by pent-up demand and lower interest rates, the median price of single-family homes shot up around the country but particularly in California. In Orange County, for example, the median price on new and existing homes rose 32.1% to $226,200 between the third quarter of 1987 and the third quarter of this year, according to the National Assn. of Realtors. Prices in Los Angeles ballooned 23.7% in that period, while San Francisco prices jumped 21.5%.
- Baseball cards. Prices of this form of sports memorabilia rose faster than just about any other group of collectibles this year. Cards in mint condition of former New York Yankee slugger Mickey Mantle in his rookie season, 1951, shot up to as much as $5,000 apiece, compared to only $700 five years ago.
- Copper. The hottest commodity toward year-end, copper prices rose to record highs partly because of strikes in mines in Peru, a major producer. But don't go melting your pennies just yet. Prices are expected to slip back.
- BankAmerica stock. Spurred by the once-ailing bank's strong turnaround, due in part to improved loan quality and cost cutting, shares have risen xx% this year.
Things That Should Go Up
- Sales of "Cashing In on the American Dream: How to Retire at 35," by Paul Terhorst. The former accountant, who retired at age 35, appeared on the covers of Money magazine and archrival Changing Times in the same month. The magazines were not happy but Terhorst's publisher was.
- Credit card fees. More people paid off credit card bills without incurring interest charges this year, due largely to reduced tax breaks for card interest. Banks, seeking to recoup lost revenues, consequently are beginning to boost annual fees, late fees or other charges.
- Sales of Series EE savings bonds. Thanks to a new tax bill, buyers of new bonds can earn interest tax-free, starting in 1990, if proceeds are used for their childrens' education.
Best Conservative Investments
- Money market funds. Their average yields were as much as two percentage points above archrival bank money market deposit accounts during the year.
- Utility stocks. Their high dividends served as a cushion against stock market volatility. Consequently, mutual funds investing in utilities are among the top performing groups this year.
Dumbest Investment of the Year
- Buying anything sold over the telephone by strangers. Telemarketed investment scams proliferated this year as purveyors of everything from phony gold mines to commodity pools found plenty of suckers willing to part with their money on promises of getting rich quick.