Four years, 1,000 points later, the bull still roams. But random-walk path gives way to choosiness

A real Texas longhorn was cavorting through Wall Street's cement canyons last week. And the equity markets took the hint. Weighing nearly a ton, the steer was hired to pose for a new series of Merrill Lynch & Co. commercials. But it also seemed a fitting reminder of how far this magnificent bull market has come since since Friday, Aug. 13, 1982.

Remember? The Dow Jones industrial average sank to 776.92. International Business Machines was trading at a paltry $63 a share. Sweet Arab crude hung at $32 a barrel. You could lock in yields of 13 percent on a 30-year United States government bond. Gold sold for $334 an ounce. And a wallet-size portrait of George Washington was worth 263 yen.

Now four years and more than 1,000 Dow points later, IBM looks cheap at $134 a share. The Organization of Petroleum Exporting Countries is rejoicing over oil stablizing at $15 a barrel. Long-term Treasury bonds are down to hat-size yields (7.3 percent). Only recently did bullion bugs get to see their precious metal rise as high as $392. As for the mighty dollar, scarcely a day goes by that the dollar doesn't trade at a new low against the yen: Last week it hit 154 yen.

Obviously, the financial world has rotated a few times since 1982, giving investors all sorts of new things to factor in. But the fuel for rallies past and present seems to be the same: anticipation of a drop in interest rates.

Back in August of '82, it was a cut in the discount rate to 10.5 percent that got things going. Now, as the rate stands at 6 percent, investors are hoping the Federal Reserve Board will prod the sputtering economy with another rate cut.

Last week, based on such hopes, investors held something of an anniversary rally. The Dow Jones industrial average shot up early in the week. And the party continued through Friday as the market strung together five days of consecutive gains for the first time in two years. By Friday's close, the Dow was at 1,855.60, up 72.98 points for the week.

On this page four years ago, Monte Gordon exuded optimism about the rise in equities. Today Mr. Gordon, director of research at the Dreyfus Corporation, a large institutional investment firm, is upbeat but more restrained. The bull market has ``not run its course yet,'' he says. ``But it's getting more selective. It won't be as monolithic or as sweeping as in the past.''

Michael Metz, a portfolio tactician at Oppenheimer & Co., agrees: ``The pervasive move is behind, a fragmented one ahead.'' Mr. Metz says the move to date has been based on a revaluation of stocks in an environment of low inflation and low interest rates, where earnings are simply worth more.

Now, companies need to show some ``real earnings improvement, some earnings dynamism.'' As that occurs on a case-by-case basis, individual stock prices will rise, he says.

Indeed, a note of urgency creeps into the voices of Wall Street sages when they say that corporate earnings must perk up if the bull market is to revive. The Commerce Department did nothing to assuage such concerns Friday when it reported that industrial production fell 0.1 percent in July.

Does that concern extend into the next four years? Or are we headed for Dow 3,000 and another blissful bull market run?

``Somewhere between here and the end of the decade, we're going to see a recession,'' says Gordon at Dreyfus. But not yet. Over the next year to 18 months, he would invest in cyclical stocks -- companies that do well as the economy gathers steam: chemicals, autos, lumber, aluminum, and technology.

After that, he expects a ``serious decline. Remember, this is a four-year old bull, it's getting a little long in the tooth.'' For long-term investors, then, he advises defensive issues -- companies that do well even when the economy stumbles: drug and health care, utilities, consumer staples, specialty retailers.

At Oppenheimer, Metz's long-term perspective is even darker. ``The stock and bond market are very attractive now. But I have no conviction that will be true in a year and a half.'' He's worried about the ``abnormally'' high debt levels and says, ``You can't build an economy on McDonald's hamburgers and restructuring alone.''

Still, when pressed for long-term picks, Metz recommends buying oil companies with solid financials. He sees the peak in Soviet and US oil production as inevitably returning control of crude prices to OPEC.

And utility stocks ``are extraordinarily attractive to the long-term investor,'' says Metz. The industry is flush with mature companies generating heavy cash flow, and there's a shortage of new equity being floated. The Dow utilities index hit record highs this week and has been rising steadily over the last few months even as the broader averages fell.