European Stars and Stripes (Newspaper) - April 29, 1992, Darmstadt, Hesse                                Page 18 a the stars and stripes wednesday april 29, 1992 Money matters Dow to feel Impact of 4 Stock split calculation of average must be adjusted by Chet Currier a business writer new York a a profusion of Stock splits looms in the next few weeks for the elite group of 30 companies that make up the Dow Jones Industrial average. That will mean some adjustments in the Way this Grande Dame of Stock Market indicators is calculated. And quite possibly it will touch off a renewed debate about How accurate a picture the average presents As to what is happening in the marketplace. The four Dow components scheduled to split Are the coca cola co., 2-for-l effective May 12 Procter amp Gamble co., 2-for-l on May 15 the Walt Disney co., 4-for-l on May 18 and Merck amp co. Inc., 3-for-l on May 26. To compensate for the resulting Sharp reductions in the prices of those stocks the arithmetic used to compute the Dow will be revised. The divisor used in the calculation which now stands at 0.559, will fall to about 0.468, estimated Pete Frein chief statistician at Dow Jones amp co., the publishing company that is also the averages proprietor. In the interests of precision the divisor will also be extended by four More digits to the right of the Decimal Point Frein reported. But it is the level of the divisor not its exactness that concerns Many data minded followers of the Stock Market. The lower it gets they said the More the average May seem to overstate the  and Downs of the Market. A what this Means is much More volatility in terms of Points a said William Lefevre an analyst at Tucker Anthony inc. Originally the Dow was computed simply by adding up the prices of the 30 components and dividing by 30, just As you would figure any arithmetical average. But in order to give it continuity the divisor had to be adjusted each time some significant change occurred in the averages makeup a such As a Stock split or on relatively infrequent occasions a change in the roster of companies themselves. Eventually in the 1980s, the divisor dropped below 1 and became in fact a a multiplier a since each change of a Point in a component Stock now resulted in a move of More than a Point for the average. When the divisor drops below 0.5 for the first time in May the effect will have been magnified to the extent that each Point move up or Down for a component Stock will mean More than two Points change in the average. For example a drop of a single Point each for the 30 Dow stocks will then mean that the average tumbles More than 60 Points. This suggests to Many observers that occasions of scary swings in the Dow a say of a Hundred Points or More in a single session a Are Likely to become More and More common. But some observers contend that that Prospect Isnit As troubling As it might sound. Bigger Point changes come naturally these Days anyway they say since the average recently above 3,300, is higher than it has Ever been before. A 100-Point change today percentage Wise is no greater than a 30-Point Rise or fall was a decade ago when the average traded around 1,000. As the divisor continues to shrink the average will presumably need an overhaul someday a perhaps a split of its own if Wall Streeter can Ever be persuaded to adjust their historical memories accordingly. But Frein said last week that nothing of that sort is under consideration now. Disability fund facing depletion experts say by Jim Luther the associated press Washington the social Security fund that pays monthly disability checks to More than 4.3 million americans will run out of Money within five years unless new financing is found commissioner Gwendolyn s. King said monday. However King and other experts stressed in testimony before a Senate finance subcommittee that the much larger social Security retirement fund is not in trouble. A the Public should not be Given the impression that their social Security benefits Are in any danger a she said. A there is no state of  the Bush administration will review the disability fund before making a recommendation late this year for boosting its finances King said. But sen. Daniel Patrick Moynihan d-n.y., chairman of the social Security subcommittee and other witnesses at a hearing said most of the problem could be solved simply by earmarking slightly More of the social Security payroll tax to the disability fund. Under present Law most workers will have 7.65 percent of this years wages withheld for social Security. That includes 1.45 percent for medicare 0.6 percent for disability insurance and 5.60 percent for the retirement system. Employers match the tax. Starting in the year 2000, the disability share is scheduled to Rise to 0.71 percent and the retirement portion will fall to 5,49 percent. Advancing that change to 1992 would produce an additional $55 billion for disability payments Over the next 10 years without harming the retirement fund said Robert Myers who helped write the Bill that created social Security enacted in 1935. He is still considered one of the Foremost authorities on the subject. However he noted estimates that major changes will have to be made in social Security if the system is to survive the next 50 years. Robert Ball who was social Security commissioner from 1962 to 1973, recommended that even More of the tax a 0.85 percent a be devoted to disability. That change would leave the retirement and disability funds on sound footing until the mid-2030s, he  Friendly a a new Jersey Pencil manufacturer is trying to write its Way into the environmental forefront. Chris m. Wiedinmayer chairman of the Board of the Faber Cas Tell corp., based in Parsippany holds up the company s new recycled Pencil american dec writer. The Pencil is made from recycled newspaper and cardboard fibres instead of Wood. Wiedenmayer also shows a Slat of rigid recycled fiber right that is used to make the new  economic forecasts Don t always come True by John cunn1ff a business analyst new York a americans became accustomed to economic disappointments Over the past year when few optimistic expectations became realities. Time after Lime the recession was declared Over when it probably Wasny to retailers expected Consumers to give them a lift but it did t develop the jobless rate was forecast to fall but it continued rising. After a year of disappointments Many people became conditioned to expect bad news when Good news was forecast to discount optimism and to delay projects rather than commit to them a in Short to expect disappointments and Rainy Days. But there is another Side to this phenomenon recent history is Replete with examples of How the worst fears and forecasts not Only did no to come to pass but were so ridiculously off the Mark they now seem silly. To go Back Over a list of some of these non events is almost certain to lift Peoples spirits when they need it most perhaps at this very time. John Dessauer an intrepid financial adviser who says he interprets the world from a an untrodden Point of View a recalls that within the past 15 years we have been told to expect inflation of 35 percent a year Oil prices of More than $100 a barrel and interest rates forever in the double digits. You too probably recall the popular Contention that huge Federal deficits would crowd private borrowers from the Market a forecast that was followed by the swiftest Rise in private debt in american history. Some people will recall the late 1970s, when mortgage lenders explained to borrowers that never again in their lifetimes would they see single digit rates an expectation that was followed by a return to single digits. It was not uncommon within this period to read allegedly scholarly analyses showing Why the Price of Gold would Rise to $2,000 or even $4,000 an ounce because of economic uncertainty instead of falling under $500. Many people will recall that the Stock Market crash of 1987 was thought to be the Onset of a global economic recession which did no to come and that . Export would never recover when in fact they have. All these conclusions observed Dessauer were that result of careful study sometimes involving sophisticated computer modelling by some of the worlds most intelligent economists. A How can so Many intelligent people be so wrong so often Quot he asked. He provided an answer Worth dwell ing upon. Economies Are not Static systems he said causes and effects forever change. As Dessauer suggested economies Are dynamic eve changing rather than Static. Circumstances Seldom re main As they were when forecasts were issued. People change. Events change. Perceptions change. Sometimes it seems that when the fears Are deeper and most prevalent the turning Point has arrived ant the dire forecast itself becomes part of the turnaround process