As market sniffed trouble, some issues were in clover

There is an old Wall Street saying: Where there is trouble, there is an investment opportunity. Last week on Wall Street was a perfect example of the maxim. Defense stocks swelled as the troubles in Iran and Afghanistan continued; gold stocks soared as the price of gold skyrocketed; mining issues were in hot demand, since they will benefit from higher metals prices.

But the Dow Jones industrial average, as it did all last year, lagged. For the week, the widely watched Dow dropped 10.07 points, closing at 828.84. Volume swelled during the latter part of the week as the turbulent news events flashed across the ticker tape.

Wall Street was not happy with the turn of events in Afghanistan. As william Gibson, and analyst with Smith Barney, Harris Upham & Co., said, "To be blunt, there is a lament that the administration is now bungling two international crises, not just one." Mr. Gibson noted that until investors feel there is some positive effort being made on the foreign policy front, "investors are doing the obvious: nothing. Cash has a nice yield, and there does not seem to be any hurry to commit to any market."

Although the events in the Middle East called the tune for the market last week, another analyst, Monte Gordon of the Dreyfus Fund, a billion-dollar mutual fund, said there has been a shift in US foreign policy that Wall Street has begun to focus on. He said this shift will put the United States into a more activist role: "The 1980s will be different from the 1970s, where we apologized and self-flagellated ourselves for what we did in the 1960s."

Some of Wall Street's favorites last week, as it invested in what it presumed would be a large increase in defense spending, included Boeing, General Dynamics , Lockheed, and McDonnell Douglas, all of them important defense contractors.

While Wall Street was investing in defense stocks, Europeans and Arab investors were buying gold bullion. Its price soared, making the headlines all week. Likewise, the prices of the gold stocks were big movers. Among those making major moves were ASA Ltd., Benguet Consolidated Mining, homestake Mining, and Giant Yellowknife Mines (Amex).

Silver prices bubbled over the same way, and the silver mining companies, including Helca Mining, Asarco, Sunshine Mining, and Callahan Mining, all were big winners. On Friday, however, some profit taking ate into the advances of the mining and metals group.

Even though the stock market did not fare well last week, it was not a catastrophic week, either. One of the reasons for the market's resistance to decline, said Morris Cohen, an economist with Schroder Naess & Thomas, investment counsel, is that price-to-earnings (P-E) multiples are so low. Mr. Cohen commented: "While no one can promise that these currently low P-Es will not slip further, it is really very difficult to envision an environment which might cause further significant erosion. Even in the uncertainty which surrounded World War II, multiples on the Dow were higher than they are now."

These multiples might slip if earnings in 1980 went through the wringer. According to Argus Research, corporate profit comparisons, measured against 1978 , should start declining for the fourth quarter of 1979. this negative comparison should continue until the second half of 1980, when the research service expects a significant improvement in earnings. Should Argus's forecast prove accurate, it would not be unrealistic to expect the stock market to rally early in 1980.