Market Place; After Eight Years, the Bear Is Back

For the millions of people too young to remember the bear’s last visit to Wall Street – from 1980 through the end of August 1982 – this is a whole new world. Bear markets are characterized by pain – and not only for those who raise money and invest on Wall Street. A prolonged bear market darkens the national outlook. People spend less and invest more cautiously, altering how much money is available for corporate expansion, what kinds of companies can prosper, how many new jobs are created and which are eliminated. ”This is not a Wall Street phenomenon,” Mr. [Mickey Levy] said. ”It is an economic phenomenon.” Of course, the bear market is already changing the daily business of Wall Street, shrinking revenues and putting new and sometimes unfamiliar demands on a brokerage industry that has been pulling in its belt since the 1987 crash. Already, all across Wall Street, executives are beginning to talk of the need to do ”more hand-holding” in the months ahead. ”In these times,” one portfolio manager said carefully, ”even a well-structured, defensive portfolio has a more worried and concerned owner.” Are young retail brokers, caught in their first bear market, up to this new task? One enterprising investment consulting firm, the Selbst Group of White Plains, sees room for improvement. It has recently trumpeted the introduction of a ”kinder, gentler sales methodology” for brokers. Its training regimen instructs brokers to toss out the ”old hard-sell concepts” and shows them ”how to become empathetic listeners.” Just as economists bicker over the definition of a recession, not everyone on Wall Street is convinced that the events of the last two months qualify as a genuine bear market. Mr. [Jack Sullivan] of Van Kasper thinks such quibbles are silly. ”I hardly think the label matters,” he said. ”If people don’t spend, if companies don’t commit to capital expenditures, if banks don’t lend and if the sickening sense begins to take hold that debt is nobody’s friend anymore – it doesn’t matter what you call it, it’s a problem.”
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HENRIQUES, DIANA B.

Full text: [New York Times] Sep 28, 1990

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COMPANY NEWS; Stock Buyback Plan Announced by Carbide

Investors have been hoping for a takeover, sale or spinoff of some of Carbide’s assets to increase shareholder value. Carbide shares have been trading recently at near 1990 lows and at less than half of the 1989 high of $33.25. ”We will have the best olefins chain petrochemicals and industrial gases businesses in the world, augmented by high-quality specialty businesses,” the company’s chairman, Robert Kennedy, said in a statement. Olefin chain petrochemicals are used in paints, plastics, synthetic fibers and other materials.
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Reuters

Full text: [New York Times] Sep 28, 1990

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COMPANY NEWS; Pop Radio Shares Decline by 33.9%

In a filing with the Securities and Exchange Commission, Heritage said the merger could not be completed until after Oct. 31. After that date, either party has the right to terminate the merger agreement.
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Special to The New York Times

Full text: [New York Times] Sep 28, 1990

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L.A. Gear Cites Ad Costs as Net Slides 35% in Quarter

L.A. Gear, which stubbed its toe after racing to become the nation’s No. 3 sneaker firm, said Thursday that third-quarter earnings were off 35% from last year’s pace. It was the second straight decline in quarterly earnings for L.A. Gear, which until this spring had enjoyed galloping profit growth since becoming a public company in 1986. The company also projected that profits for the fourth quarter and the entire year will be off from 1989. Earnings for the quarter ended Aug. 31 totaled $14.3 million, despite sales that climbed 40% to $300.3 million. The company, in a news release from its headquarters in Marina del Rey, said higher advertising expenses and the over-all slump in retailing lowered profit in the third quarter and will do the same in the fourth quarter. (excerpt)
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Silverstein, Stuart

Full text: [Los Angeles Times] Sep 28, 1990

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`Dark Clouds’ for Economy Index Takes Biggest Fall in 3 Years

Economist Kermit Baker of Cahners Economics in Newton, Mass., said even the longer workweek might be misleading. “The decline in the leading indicators provides further proof that the recession began in August,” said Jerry Jasinowski, president of the National Assn. of Manufacturers. “Since the stock market is a forward-looking indicator, the precipitous decline in stock prices is more tied to expectations of recession than to the deterioration in corporate earnings witnessed so far,” Jasinowski said.
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Full text: [Los Angeles Times (pre-1997 Fulltext)] Sep 28, 1990

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Investors Bet on Koger’s Stock Drop

Stock market investors are betting that Koger Properties Inc.’s stock will fall. Short selling in Koger increased 34.2 percent this month, reflecting speculation that the $2.80 annual dividend will be cut and the stock will subsequently drop. A soft real estate market is pressuring Koger’s profits and the amount it can pay in dividends. One analyst said he expected the dividend could be cut to $1.65 a share. From Aug. 15 to Sept. 14, investors betting on the stock drop sold 635,718 shares short compared with 473,672 shares sold short the month ended Aug. 14. (excerpt)
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Hirsch, Jane

Full text: [Jacksonville Business Journal] Sep 28, 1990

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Economic indicators take plunge/Recession probability increases 50 percent

Seven of the forward-looking indicators dragged the index under in August. They were a drop in an index measuring consumer confidence, declining stock prices, falling orders for new plants and equipment, a decrease in unfilled orders, a rise in weekly unemployment claims, a drop in building permits and a fall in the money supply. In answer to the question, “What is the probability of a recession within the next 12 months?” the new survey found “the median probability of recession has jumped to 50 percent from prior readings which have been in the 20-30 percent zone.” Graph: Economic indicators (text) (p. 15); Credit: Knight-Ridder Tribune News, Source: Bureau of Economic Analysis
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Full text: [Houston Chronicle (pre-1997 Fulltext)] Sep 28, 1990

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Higher oil prices push Dow down, but bonds rally

Stock prices declined broadly again Thursday as higher oil prices spooked investors. But bond prices rallied on technical factors and hopes of a budget agreement in Washington. The Dow Jones average of 30 industrials fell 32.17 points to 2427.48. The key index lost nearly 26 points on Wednesday. Stock trading volume on the floor of the Big Board came to 182.69 million shares, up from 155.57 million Wednesday. Nationwide, consolidated volume in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 222.55 million shares.
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Full text: [Chicago Tribune (pre-1997 Fulltext)] Sep 28, 1990

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Freeze came too early for the MSE

September is likely to go into the record books as the slowest trading month in five years on the Midwest Stock Exchange and other major stock markets. August, on the other hand, was the Midwest’s second-busiest month in history. “I think we’re frozen in indecision,” says Roger Hendrick, exchange vice president. “We’ve got a combination of rising long-term interest rates, people waiting to see if a capital gains tax will be adopted, talk about a recession and stock prices going down the tubes.” Hamilton Investments Co., a subsidiary of Household International Inc., wants to add 100 salesman in its 18-office network, according to Robert A. Ebersole, Hamilton’s chairman. The firm, which moved into larger offices at 2 N. LaSalle St. this spring, may also ask for more space in the building, he says.
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William Gruber

Full text: [Chicago Tribune (pre-1997 Fulltext)] Sep 28, 1990

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PLUS BUSINESS

TOKYO MART SLIDES: Uncertainty about the Middle East and discouraged individual investors sent stock prices plunging to the lowest point in 3 1/2 years in Tokyo today. The closely watched 225-issue Nikkei Stock Average shed 788.41 points, or 3.62 percent, to finish at 20,983.50. It was the lowest close since March 3, 1987, when the closely watched average ended the day at 20,971.39 points. Friday’s finish was also lower than the October, 1987, Black Monday drop to 21,910.08. AU REVOIR, SMURFS? A major theme park in northeast France is considering filing for bankruptcy or selling up, the company and union sources said in Metz, France, today. “Filing for bankruptcy because of poor results is a possibility which was put to the last works committee meeting in September” and will be put before the board on October 5, said union sources at the Big Bang Schtroumpfs (Smurfs) theme park at Hagondange in the Moselle region. SOREPARK, which manages the park, is expecting that its second season, due to end with the Oct. 6-7 weekend, will have seen a total of only 400,000 visitors against the 700,000 needed to pass the break-even point.
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Full text: [Chicago Sun - Times] Sep 28, 1990

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Economic indicators plunge

“Although the median forecast shows positive real growth in both 1990 and 1991, the pace is slow enough to make two quarters of decline in a row – the informal definition of recession – a distinct possibility,” said the National Association of Business Economists in a report on the survey. Seven of the forward-looking indicators dragged the index under in August. They were a drop in an index measuring consumer confidence, declining stock prices, falling orders for new plants and equipment, a decrease in unfilled orders, a rise in weekly unemployment claims, a drop in building permits and a fall in the money supply.
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John D. McClain

Full text: [Chicago Sun - Times] Sep 28, 1990

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International Totalizator Systems Responds to Current Market Valuation

International Totalizator Systems Inc. (NASDAQ:ITSI) is taking this opportunity to address its shareholders and members of the investment community regarding market valuation and confidence. James Walters, chairman, chief executive officer and president, said: “The current market price of ITS common stock does not reflect the long-term growth prospects of the company. Clearly, confidence in the market has been shaken for many reasons, the majority of which we feel are not accurately related to the condition or activities of the company. (excerpt)
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Patchen, Karen

Full text: [Business Wire] Sep 28, 1990

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Market Reform Bill Passes House, Goes to Bush

Requires the Treasury Department, Federal Reserve Board, the CFTC and SEC to report annually to Congress on their efforts to protect the integrity of the markets. Drexel Burnham Lambert Inc., the one-time junk bond giant of Wall Street, collapsed in February after the failure of its parent company, which SEC officials had no authority to monitor. The original House version, the Securities Markets Reform Act passed in June, contained a provision giving the SEC authority to limit program trading “during periods of extraordinary market volatility”- sharp changes in stock prices.
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John M. Doyle

Full text: [The Washington Post (pre-1997 Fulltext)] Sep 29, 1990

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Economy heading for “dark clouds’ Index gauge plummets

Economist Kermit Baker of Cahners Economics in Newton, Mass., said even the longer workweek might be misleading. “Since the stock market is a forward-looking indicator, the precipitous decline in stock prices is more tied to expectations of recession than to the deterioration in corporate earnings witnessed so far,” [Jerry Jasinowski] said.NO IMPROVEMENT [John Silvia] said surveys after the ’87 crash showed consumer confidence fell sharply but soon bounced back. Consumer confidence surveys following the Iraqi invasion also plummeted, he noted, without signs of improvement.
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Full text: [Telegram & Gazette] Sep 29, 1990

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Legislation to Reform Stock Market Passes / House OKs bill that will expand SEC owers

Drexel Burnham Lambert Inc., the one-time junk-bond giant of Wall Street, collapsed in February after the failure of its parent holding company, which SEC officials have complained they had no authority to monitor. The original House version, the Securities Markets Reform Act passed in June, contained a provision giving the SEC authority to limit program trading “”during periods of extraordinary market volatility” – the sharp climbs or drops in stock prices. The version passed by the Senate narrowed slightly the scope of the SEC’s authority. It gives the SEC rule-making authority to prohibit during times of “”extraordinary market volatility any trading practice” in securities that the agency previously has found “”contributed significantly” to the threat to orderly markets or “”is reasonably certain” to do so.
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Full text: [San Francisco Chronicle (pre-1997 Fulltext)] Sep 29, 1990

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BUSINESS BRIEFS

WHITMAN ANNOUNCES SPIN-OFF AND LAYOFFS Directors of Whitman Corp. voted to spin off its specialty food subsidiary, Pet Inc., to shareholders and eliminate 1,000 jobs in a restructuring aimed at cutting costs and bolstering stock prices.
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Full text: [San Francisco Chronicle (pre-1997 Fulltext)] Sep 29, 1990

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Biggest Fall in 3 Years for Key Economic Index

The government’s main economic forecasting gauge fell a sharp 1.2 percent in August, the Commerce Department said yesterday, as falling stock prices pulled it down in the steepest slide since the October 1987 market crash. It is designed to reveal the economy’s direction six to nine months down the road, and the view was not promising. Spiraling oil prices since Iraq’s August 2 invasion of Kuwait have led most private forecasters to predict a coming recession. Aside from oil prices and Mideast tension, consumer and investor attitudes have been battered by a flood of bad domestic news, including lack of progress on measures for controlling the government’s budget deficit and reports that insurance funds for the nation’s banks are dangerously low.
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Full text: [San Francisco Chronicle (pre-1997 Fulltext)] Sep 29, 1990

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Falling volume matches drop in stock prices

“Since the stock market is a forward-looking indicator, the precipitous decline in stock prices is more tied to expectations of recession than to the deterioration in corporate earnings witnessed so far,” [Jerry Jasinowski] said. [John Silvia] said surveys after the 1987 crash showed consumer confidence fell sharply but soon bounced back. Consumer confidence surveys following the Iraqi invasion also plummeted, he noted, without signs of improvement. Lawrence A. Hunter, deputy chief economist with the U.S. Chamber of Commerce, said that “only consumer spending increases will keep the real GNP (gross national product) from falling in the current quarter. But, beginning in the fourth quarter, the real GNP will fall.”
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Mariann Caprino, The Associated Press

Full text: [Phoenix Gazette] Sep 29, 1990

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Dark clouds’ seen ahead for economy

“Since the stock market is a forward-looking indicator, the precipitous decline in stock prices is more tied to expectations of recession than to the deterioration in corporate earnings witnessed so far,” [Jerry Jasinowski] said. [John Silvia] said surveys after the 1987 crash showed consumer confidence fell sharply but soon bounced back. Consumer confidence surveys following the Iraqi invasion also plummeted, he noted, without signs of improvement. Lawrence A. Hunter, deputy chief economist with the U.S. Chamber of Commerce, said that “only consumer spending increases will keep the real GNP (gross national product) from falling in the current quarter. But, beginning in the fourth quarter, the real GNP will fall.”
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Full text: [Pantagraph] Sep 29, 1990

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UAL Shares Jump On Davis’s Offer

LEAD: The UAL Corporation’s stock price jumped $6.625 today, to $97.25, on the New York Stock Exchange after the investor Marvin Davis offered late Thursday to join an employee buyout of the company, which runs United Airlines.
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Reuters

Full text: [New York Times] Sep 29, 1990

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