Mergers bring out the bulls

The merger mania brought a new surge of activity on Wall Street last week, prompting another run at the 1,000 mark. But one of Wall Street's more successful money managers, Victor J. Melone, senior vice-president of Manufacturers Hanover Trust's trust division, believes this rally presents another good opportunity to unload stocks.

Mr. Melone said in an interview last week, "I wouldn't expect a sustained move up at this point."

He believes it is possible the economy will have a "double dip" this year, as it stumbles along burdened by high interest rates and uncertainty about what Congress will do with the President's tax proposals. He thinks this lower economic growth could prompt a host of disappointing earnings and less dividend growth. He says interest rates will not decline enough to compensate for the lower earnings.

Mr. Melone has put his money where his mouth is: In a typical portfolio managed by his division, 30 to 35 percent is invested in cash, 20 to 25 percent in bonds, and 47 to 50 percent in stocks. When the bank is bullish, it typically invests 95 percent or more of its funds in stocks.

Last year Mr. Melone put his money in the right places. The bank's special equity fund, which has $300 million, gained 60.95 percent; the Supplemental Common Stock Fund, with $280 million, was up 49.53 percent; and the Group Trust Common Stock Fund, with assets of $160 million, climbed 38.29 percent. At the same time, the Dow Jones industrial average was up 22.14 percent and the Standard & Poor's 500 gained 32.44 percent.

A whiff of spring in the canyons of Wall Street didn't hurt last week as inventors moved back into the market. The Dow Jones industrials neared the 1, 000 mark again, closing for the week at 985.77, up 21.15 points. In the news background, the prime interest rate dropped to 17 1/2 percent amid predictions it would fall still further. At the same time, the assets of the money-market funds crested the $100 billion mark for the first time, hitting $101.21 billion last week