Ringing in stock year with dismay

The public’s attitude is just one of the many hurdles the stock market faces as it enters the fall – which, to Wall Street’s mind, is the equivalent of beginning a new year. As traders came back from Labor Day breaks and summer vacations last week, they also faced a major psychological barrier – in two of the past three years the stock market has celebrated the arrival of fall by falling. All those facts haven’t gone unnoticed by foreigners, who seem to have pulled away from the U.S. financial markets. They’ve been lured away, the experts say, by higher interest rates and greater security overseas, and pushed away by the rapid deterioration in the value of the dollar. And even professional investors and money managers, while publicly extolling the stock market’s virtues, appear to be turning as cautious as small investors after this summer’s volatility in stock prices. H. Erich Heinemann, chief economist at Ladenburg, Thalmann & Co. Inc., says private demand for credit is “falling like a rock” as the economy slows. And he thinks this will offset the federal government’s insatiable appetite for borrowing and prevent interest rates from rising.
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John Crudele

Full text: [Chicago Sun - Times] Sep 10, 1990

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Mid-American Sues Over Collapse of Florida Deal

Mid-American Waste Systems Inc. plans to file suit over the apparent loss of a lucrative Jacksonville landfill deal that caused the company’s stock price to plunge. On Sept. 4 a company spokesman said Mid-American had the lawsuit prepared and ready to file in an attempt to keep Jacksonville, Fla., from negotiating a landfill contract with Waste Management Inc. Until Jacksonville decided in late August to negotiate with Waste Management, Mid-American and many stock analysts thought that Mid-American had a lock on the deal. (excerpt)
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Proctor, Gordon

Full text: [Business First] Sep 10, 1990

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Yes, Virginia, There Are Good Banks – And Here’s a List of 14 That Qualify

Bank stocks have fallen hard in 1990, and as a result, the dividend yields on many of the US’ largest banks now are well into double digits. In the general raid on banks, institutions with solid financials and strong prospects have also been affected. Reid Nagle, president of SNL Securities, has composed a list of 14 banks that could help investors turn up hidden values in bank stocks. The list, which ranks the banks in order of their attractiveness as investments, is not intended to serve as a guide for investment decisions. SNL focused on publicly traded institutions that have no research coverage and then used a weighted ranking of relative value (33%), asset quality (50%), and profitability (17%) to rank them. Some superior banks were kept from the list if they had an undue concentration of real-estate loans that could become nonperformers. Others were left out because they were too small. Royal Bank of Pennsylvania heads the list, followed by First Western Bancorp Inc. and Merchants Bank of New York.
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Full text: [Barron's National Business and Financial Weekly] Sep 10, 1990

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To Hell in a Stock Basket: What to Do About Index Arbitrage

To make money by selling the index and buying the stocks or vice versa, the index arbitrageur must move faster than thought would permit. Arbitrage pushes all stocks in the same direction according to the weight they have in the determination of the index – a weight that has been fixed in advance and can change only through deliberate action by the proprietor of the index. Theoreticians who have been commissioned to prove that index trading is good for the market have recently recognized that all trading is to some extent influenced by noise. The insiders in the market make the noise themselves because it produces money for them. Index trading is overwhelmingly a speculative activity. Recently, the New York Stock Exchange imposed a new and improved tick rule that prevents arbitrage from accelerating the movement of stock prices on the way up as well as on the way down.
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Mayer, Martin

Full text: [Barron's National Business and Financial Weekly] Sep 10, 1990

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But Are They Really Bearish?

The mood among professional money managers has turned decidedly cautious because of the Mideast crisis and a dimming economic outlook. However, the experts are not looking for any further sharp sell-off in stock prices, and many are beginning to do some bargain hunting. Of the 96 money managers polled in Barron’s latest quarterly survey of institutional portfolio managers, 52% describe themselves as bearish on the market’s immediate outlook, 28% remain steadfastly bullish, while 20% are undecided. Most managers are wary about the US economy. Although the majority do not predict a formal recession over the next year, the mean forecast for real gross national product growth is only a modest 1%. The professionals rated small capitalization issues as the most attractive investment choice and were not enthusiastic about cyclical stocks. The respondents rated the possibility of a recession and the effects of the federal budget deficit as the biggest single threat to equity markets. In interviews, 6 portfolio managers discussed factors affecting the stock market and whether the market is becoming bearish in nature.
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Palmer, Jay

Full text: [Barron's National Business and Financial Weekly] Sep 10, 1990

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Stocks Slip As Oil Prices End Higher — Dow Falls 3.96 Points As Investors React To Mideast Rumors

Stock and oil prices seesawed in opposite directions as investors first coolly assessed the Mideast developments, and then fearfully jumped at shadows. The October futures contract for crude oil started the day dropping sharply lower — as much as $1.69 a barrel — and stock prices headed higher; the Dow Jones Industrial Average was up 34 points at noon. But oil turned around on a rumor that Iraq was massing troops on the Jordanian border, and the October contract closed with a gain of $1.26 a barrel. In turn, the thinly traded stock market quickly lost steam; the Dow industrials finished 3.96 points lower at 2615.59.
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By Christopher Winans

Full text: [Wall Street Journal] Sep 11, 1990

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Stock Prices End Mixed as Rumors on Mideast Crisis Fuel a Surge in Oil

The Dow Jones Industrial Average jumped out to an early gain of more than 30 points, which it held until midafternoon when rumors of Persian Gulf military activity and a subsequent surge in oil prices sparked a market sell-off. The industrial average ended the day with a loss of 3.96 at 2615.59. Among the broader indexes, Standard & Poor’s 500-Stock Index dropped 1.77, or 0.55%, to 321.63; by comparison, the loss in the Dow Jones industrials amounted to 0.15%. The New York Stock Exchange Composite Index fell 0.81 to 176.70 and the Dow Jones Equity Market Index lost 1.49 to 298.14. But advancing issues edged decliners by 777 to 739 on the Big Board, reflecting the broad-based advance that began the session. Traders attributed the early rally to the impact of Sunday’s summit between President Bush and Soviet leader Mikhail Gorbachev, an early drop in oil prices and a strong performance from overseas stock markets.
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Wilson, David

Full text: [Wall Street Journal] Sep 11, 1990

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Japan’s Plan to Sell More NTT Shares In Privatization Put Off for Second Year

JAPAN’S MINISTRY OF FINANCE first auctioned stock in state-owned Nippon Telegraph & Telephone Corp. in 1987. It last offered shares to the public in 1988. At the time, NTT’s stock traded at just below two million yen a share, down from a high of 3.12 million yen in April 1987. In Tuesday’s edition, the history of the stock price was reported incorrectly. With Tokyo stock prices down nearly 40% since January and NTT shareholders raising a ruckus, officials at Japan’s powerful Ministry of Finance confirmed what market analysts here have been predicting for weeks: For the second year in a row, the government will postpone plans to sell nearly two million state-owned shares of NTT to private investors as part of a continuing privatization program. Ministry officials weren’t available to comment, but issued this statement late Monday afternoon: “Further {government} sales of NTT shares could trigger more declines in NTT stock prices and could have a bad influence on the stock market.”
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By Clay Chandler

Full text: [Wall Street Journal] Sep 11, 1990

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Analyst picks three airline stocks set to soar

Airline stocks have taken a beating because of the surge in oil prices following Iraq’s invasion of Kuwait. Daniel Hersh, airline analyst at Bateman Eichler, Hill Richards in Los Angeles, says the weakness in some airline stocks is a buying opportunity. He talked with USA TODAY’s David Craig. There are three major reasons. The balance sheets are strong for all three of the companies. Their cash positions are very significant. The current cash position represents 12% of the stock price of Southwest Airlines, 58% of Atlantic Southeast and 53% of Air Midwest. That compares with 3% of Delta Air Lines, which is one of the most financially conservative airlines.
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Full text: [USA TODAY (pre-1997 Fulltext)] Sep 11, 1990

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LOCAL STOCKS FALL MORE THAN THE DOW — INVESTORS LOSE BILLIONS AS MARKET VALUE SHRINKS

Since July 13, when stock prices were at a zenith, the widely followed Dow Jones industrial average, an index of 30 of the nation’s premier big stocks, tumbled 12.1 percent. In the same period, 109 stocks based in Washington, Oregon and Idaho and tracked by The Times have averaged an 18.9 percent decline – 57 percent worse than the Dow. Stock analysts say Northwest stocks, coming off a rip-roaring climb fueled by the strength of the economy here, had further to drop. But they also note, more importantly, that stocks representing the smaller companies – as opposed to the much larger Dow stocks – historically fall more precipitously in unsteady times. “It’s a two-tiered market,” said Bill Whitlow, an analyst with the Dain Bosworth brokerage in Seattle. “Secondary stocks – the over-the-counter stocks – are hurt worse than the large stocks, the Dow stocks. There doesn’t seem to be as much liquidity in the over-the-counter market these days. When people sell, the stocks tend to get marked down quicker.”
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GREG HEBERLEIN

Full text: [Seattle Times] Sep 11, 1990

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Stock Rally Is Cut Short; Dow Off by 3.96

”Then the market flattened out and volume declined,” he said, ”reflecting continued concern over how the Middle East problem will be resolved and reports of significant skepticism that a deficit-reduction package will be reached before the President speaks” to Congress tonight. Mr. Johnson maintained that these concerns were keeping investors on the sidelines with ”no sense of urgency to get their money invested in the market.” Toys ”R” Us, still under pressure in a weak retail group, fell 1, to 22 1/8, after hitting a new low of 21 7/8. More than 2.56 million shares changed hands, making it the second-most-active Big Board stock. Wal-Mart Stores fell 1, to 27, in heavy trading.
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COLE, ROBERT J.

Full text: [New York Times] Sep 11, 1990

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Stock Prices Register Declines

The Bombay Stock Exchange’s sensitive index, which covers 30 key stocks, has fallen from its peak of 1,559.4, reached in the second week of October, to 1,323 on Nov. 1. The more comprehensive Economic Times all-India index mirrored the decline as it fell from the October peak of 733.4 to 648.2. A year ago that index stood at 396.2. At one stage in the upward spiral in the markets, the governor of Reserve Bank of India, the nation’s central bank, cautioned banks against pushing up stock prices through their mutual fund subsidiaries. But some bank heads appeared to think the bullish rally had enough strength to keep it going for a while. One of them figured the Bombay Stock Exchange index would pass the 1,700 mark during the year. Report Precipitates Slide
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Mohan, T.T. Ram

Full text: [India Abroad] Sep 11, 1990

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Iraq military rumor, oil prices derail stock rally

The Dow Jones industrial average fell 3.96 points to close at 2615.59. Advancing stocks edged losers on New York Stock Exchange volume of 119.7 million shares, down from 123.8 million Friday. Oil prices surged in the afternoon on rumors that Iraqi troops were heading toward Jordan. The rumors were later denied by U.S. officials, but not before October crude rose $1.26 to close at $31.30 a barrel on the New York Mercantile Exchange. That sudden rise in oil prices quickly eroded stock prices. Bond prices also fell. Early in the day, crude oil was nearly $2 a barrel lower and the Dow index was up 35 points.
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Chicago Tribune wires

Full text: [Chicago Tribune (pre-1997 Fulltext)] Sep 11, 1990

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STOCKS: Michigan Bank Publicly Upset At Price Slump Series: 12

It wasn’t surprising that Robert J. Mylod was concerned about the 50% decline in Michigan National Corp.’s stock price since Jan. 1. However, the chairman of the state’s fourth-largest banking company raised some eyebrows when he went public with his displeasure. It also pointed out that 90% of Michigan National’s loans “have some form of security behind them” and that bank management and board members have had enough faith in the company’s performance to buy 235,000 shares of common stock since Jan. 1. “It’s very out of the ordinary,” said Anthony Polini, an analyst at A.G Edwards & Co. “However, it’s reflective of the frustration of management in today’s environment.”
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FRED VOGELSTEIN

Full text: [American Banker (pre-1997 Fulltext)] Sep 11, 1990

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CAPITAL: 1st Interstate Units Try Securitizing Series: 2

The joint offering, expected to come to market in late September, is just one of several responses First Interstate’s subsidiaries have produced to the holding company’s demand for better ratios. Whether those responses will be sufficient to boost the bank’s equity ratios, however, remains to be seen. Various Approaches “It’s a useful capital tool,” said Donald K. Crowley, an executive vice president at Keefe, Bruyette & Woods. “Their capital ratios are still pretty lean.” Shift in Fed Funds Market The curtailment of the reinvestment program, which creates additional equity, may serve to boost First Interstate’s stock price, but it also impairs the bank’s ability to issue new shares each quarter. As a result, it could drive First Interstate back to the public equity market sooner than planned.
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KELLEY HOLLAND

Full text: [American Banker (pre-1997 Fulltext)] Sep 11, 1990

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Prices Fall in Wary Market

He also argued that Calpine had no urgent reason for selling the shares, which amounted to a 21.5-per-cent interest in the company. Specifically, he said Calpine didn’t need the money at the time. [Greg Walsh] argued that Prime did not announce it would buy the units through a wholly owned entity until Aug. 10, 1989, by which time Calpine had produced some promising drill holes and Calpine’s stock price had risen. [Leon Getz] said that proposition is “preposterous.” He referred to [John Ivany]‘s testimony that Prime and Calpine had a “binding commitment” on July 14 when the deal was announced, although for tax reasons Prime had not decided which corporate entity would buy them.
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Full text: [Times - Picayune] Sep 12, 1990

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Evidence slanted, defence says: Final argument begins before Pezim hearing

He also argued that Calpine had no urgent reason for selling the shares, which amounted to a 21.5-per-cent interest in the company. Specifically, he said Calpine didn’t need the money at the time. [Greg Walsh] argued that Prime did not announce it would buy the units through a wholly owned entity until Aug. 10, 1989, by which time Calpine had produced some promising drill holes and Calpine’s stock price had risen. [Leon Getz] said that proposition is “preposterous.” He referred to [John Ivany]‘s testimony that Prime and Calpine had a “binding commitment” on July 14 when the deal was announced, although for tax reasons Prime had not decided which corporate entity would buy them.
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DAVID BAINES

Full text: [The Vancouver Sun] Sep 12, 1990

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BCE turns to the stock market to unload stake in TransCanada PipeLines

In the case of TransCanada PipeLines, the goodwill was big enough to kill most buyers’ appetites, at least in Canada. And selling TransCanada – the country’s principal carrier of natural gas – to a foreign buyer would have run into political problems. Of course, if the worst happens and TransCanada’s stock price should fall below $17.50, investors won’t exercise the warrants and BCE will be stuck with about 24 per cent of TransCanada. BCE is confident that the outlook for TransCanada is good and the stock will appreciate. At the very least, it will sell half its holding now at a good price, earning a pre-tax profit of $149 million. And it stands to make a similar gain if the warrants are exercised.
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PETER HADEKEL

Full text: [The Gazette] Sep 12, 1990

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Tokyo Stocks Rise Sharply

The dollar fell against the yen. At midday in Tokyo, the American currency was trading at 138.95 yen, compared with 140.31 yen at Tuesday’s close in New York.
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Reuters

Full text: [New York Times] Sep 12, 1990

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Dow Retreats by 2.97 Points, to 2,612.62

Investors turned sour Sep 11, 1990 in the wake of inaction on the budget deficit and stalemate in the Middle East, forcing stock prices down slightly. The Dow Jones Industrial Average closed at 2612.62, down 2.97 points.
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Cole, Robert J

Full text: [New York Times] Sep 12, 1990

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