That Wall Street is in the deepest throes of a blue-chip love rally is exemplified by some statistics forwarded our way by Jeffrey Bronchick, principal at Reed Conner Birdwell, a Westside money manager with $850 million under wing.

The biggest 50 stocks of the S & P; 500 (by market capitalization) were up this year through July 4 by an average 30.3 percent. The next 450 were up 17.2 percent. Moving down to 4,517 stocks not in the S & P; 500 (but trading at more than $5 a share), the average increase was 14.4 percent, according to Chicago-based Zack’s Investment Research Inc.

“What everybody should have done two years ago is buy those stocks that are in the index funds,” said Bronchick, referring to funds that buy stocks in a major index, such as the S & P; 500. “But that’s the history of investing, what I should have done two years ago.”

This rally is looking less like the Japanese stock market & #341; la the early 1980s (followed by the dismal 1990s), or our own 1987 (when we had the mini-crash), and more like the stock market in the first half of 1960s.

From 1959 through 1965, the Dow Jones about doubled, as the U.S. economy expanded at more than a 5 percent annual clip in many years, and inflation and interest rates were even lower than they are now.

Then, things changed. You might say, “Stocks got ahead of themselves.”

From 1965 to 1982, the Dow traded sideways. That’s 17 years. A lot of investment gurus don’t tell you that stocks can stay flat for 17 years. No plummets, no crash. Just a lot of churning to nowhere.

After 1965, you had Vietnam, urban riots, oil shocks, stagflation. Interest rates soared.

But of course, “History nevers repeats itself exactly.”

To which bears reply, “Those who forget history are doomed to repeat it.”

In any event, when mature blue-chip companies sell at more than 45 times earnings (think Coke), it’s easy to paint a scenario for several years of sideways drifting in stock prices.

Industrial bonds

Middle market manufacturers want less-expensive credit, but managements are often tied up just running the shop.

That’s why Daniel Bronfman formed West Los Angeles-based Growth Capital Associates Inc. in 1995. Bronfman works at connecting borrowers to state industrial development bonds.

Formerly with Union Bank, and then with Los Angeles-based Gruma Corp. (parent company of Mission Foods, the tortilla maker), Bronfman has seen state industrial development bonds from both the lender and borrower side.

“My experience (at Union Bank) was frustrating. I felt there were a lot of transactions that never closed because the borrowers weren’t getting the right level of coaching, service and advice,” said Bronfman.

In other words, the paperwork tornado and mind-numbing nomenclature bewildered would-be borrowers.

When some people speak of the “middle market,” they mean any company with $200 million to $1 billion in annual sales. Bronfman means companies with $7.5 million to $20 million.

These little companies can save big, if they can manage to borrow under the state program.

Without using the state program, a small manufacturer is lucky to borrow from a commercial bank at “prime plus one,” meaning the prime rate, plus a 1 percent fillip.

That’s about 9.5 percent, at prevailing rates.

But under the tax-exempt state bond program, funds can be had for 5.5 percent.

The math is easy: On $1 million in debt, using the state program can save a manufacturer about $40,000 a year.

What Bronfman touts to manufacturers is “turnkey” loan assistance. He arranges for bond underwriters, bond counsel (lawyers), and a bank’s loan guarantee, among other measures.

(Although the state lends the money to the manufacturer, and issues the bonds, a bank must guarantee repayment of the loan to the state.)

Recently, Bronfman arranged a $6.5 million industrial development bond for Killion Industries Inc., a manufacturer of store fixtures, in Vista, Calif. This year, he expects to connect manufacturers to $45 million in bond money.

To help keep costs survivable for borrowers, Bronfman collects his fees on a “contingent” basis when the bond deals closes, he collects his money.

Community banks

Did you know you can buy shares in Hanmi Bank, the fast-growing Koreatown bank?

Or how about The Bank of Hollywood, a Tinseltown bank making a comeback? And up in Glendale, you can snap up shares of the newish (formed in 1991) Verdugo Banking Co.

The aforementioned are community banks, and no, you can’t buy them on any exchange.

Rather, they are thinly traded stocks on the over-the-counter market, though they are posted on the OTC-Bulletin Board operated by Nasdaq.

The Lafayette, Calif.-based Walker’s Manual LLC publishing company has just produced a tome listing more than 500 community banks whose stocks are traded over the counter. Eight of the banks are in Los Angeles County.

Harry Eisenberg, Walker’s Manual publisher and investor, says he selects community bank stocks by the following criteria: a return on equity of 14 percent or better, a return on assets of 1.2 percent or better, growth in both net interest income and non-interest income, and share splits.

Community banks are an interesting play for several reasons, says Eisenberg.

First, they report financials to state or federal regulators in a consistent manner. And, of course, regulators don’t let just anybody start up or run a bank.

Thus, there is some protection against simple fraud, which one can encounter in other over-the-counter stocks, such as penny stocks.

Secondly, the institutional investors, which have bid up prices of listed stocks to the stratosphere, do not buy unlisted stocks.

And liquidity isn’t the problem one might think. Most community bank stocks are liquid, and easily bought or sold over the OTC-Bulletin Board, says Eisenberg.

Hanmi Bank, at most recent posting, was trading at a little over 10 times earnings, and is showing healthy growth, according to Walker’s Manual of Community Bank Stocks. (By way of comparison, San Francisco-based Wells Fargo Bank is trading at 26 times earnings). To boot, the Korean-American bank has announced an 11 percent dividend for 1997. Try getting a dividend like that out of Warren Buffett, the “passive” investor in Wells Fargo stock.

Senior Reporter Benjamin Mark Cole covers the investment community for the Los Angeles Business Journal.