Economic Scene; Thai Stock Boom Grinds to a Halt

Fund II seemed to help this time, too. The S.E.T. index, as it is called, made gains of some 60 points a day early this week, and there was a general easing of concern. On Thursday the index closed at 839.80. Nevertheless, some economists contend that the Government intervened too quickly. ”I think the fund created an artificial bottom faster than necessary,” said Chesada Loha-unchit, managing director of Tara Siam Business Information Ltd., a leading Thai research institute. ”The bottom was very near, but a lot of people with confidence in the market didn’t want to buy before the bottom. I think the authorities were too nervous.” The main worry, he said, is inflation in real estate, ”which has a lot of froth.” But compared to 1979, he said, when imported crude oil filled 80 percent of Thailand’s energy needs, the figure today, after natural gas development, is 40 percent, representing only 9 percent of total imports. Thailand also has a new Finance Minister, Virabongsa Ramangura, who when appointed Monday was in Vientiane, Laos, finishing a contract to advise the Laotian Government. In the face of rising oil prices, he said, he would concentrate on more austerity in Government spending and perhaps, finally, a tax overhaul. A nonpartisan technocrat and economic adviser to former Prime Minister Prem Tinsulanonda, Mr. Ramangura said he was known as an ”austerity economist.”
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Erlanger, Steven

Full text: [New York Times] Aug 31, 1990

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COMPANY NEWS; Simmons Near Limit On Stake in Lockheed

In an letter to Lockheed sent on Wednesday, J. Landis Martin, the president of NL Industries who is also Mr. [Harold C. Simmons]‘s top aide, said Mr. Simmons ”was prepared to invest an additional $350 million from presently available funds to effect additional purchases in Lockheed stock.” The letter was contained in a Securities and Exchange Commission filing. ”In the heat of August, Mr. Simmons has roused us from our lethargy,” said Howard A. Rubel of C. J. Lawrence, Morgan Grenfell Inc. in New York. ”He hasn’t gone away.” George J. Podrasky Jr. of Duff & Phelps Inc. in Chicago said Lockheed’s stock price fell today because the investing public ”isn’t taking him seriously until he comes up with a cold-cash offer for the whole thing.”
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GREGORY A. ROBB, Special to The New York Times

Full text: [New York Times] Aug 31, 1990

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Gulf jitters, oil prices hit stocks

NEW YORK – Stock prices closed sharply lower Thursday as investors fled the market, wary of developments in the Persian Gulf and the inflationary implications of a renewed jump in oil prices. The latest uncertainty over the Persian Gulf came on reports that Iraq’s air force commander said Baghdad would send warplanes and missiles against Israel and Saudi Arabia if war broke out between Iraq and U.S.-led forces in the Persian Gulf. The comments caused jitters about a military flare-up. With many U.S. traders likely to be absent today ahead of the three-day weekend, “Some traders unloaded positions,” said Alice Sadlo, vice president at McDonald & Co.
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CHRISTINA TOH-PANTIN

Full text: [Houston Chronicle (pre-1997 Fulltext)] Aug 31, 1990

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Stocks retreat on compounding of investor fears

Stock prices closed sharply lower Thursday as investors fled the market, wary of developments in the Persian Gulf and the inflationary implications of a renewed jump in oil prices. The Dow Jones industrial average closed at 2593.32, down 39.11, as losing stocks led gainers 2 to 1. The average had been down 20 to 25 points much of the day, but computer program trading in the last half-hour dragged the market lower. The blue-chip indicator was down nearly 54 points before regaining some ground.
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Chicago Tribune wires

Full text: [Chicago Tribune (pre-1997 Fulltext)] Aug 31, 1990

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TIME NOT TO PLAY

Pentland PLC, the British consumer goods group that had announced its intention to sell its huge 36.2 million-share block in Reebok International, now says it is taking its $489 million Reebok stake off the market until the Stoughton-based sneaker company’s stock price gets pumped up. In June, when Pentland said it would sell off its huge Reebok holdings, the sneaker stock was trading around $18; Reebok promptly enacted a “poison pill” antitakeover plan, and the shares now trade around $13. Furthermore, Doubleday was hoping to publish a conventional business book, drawn from [Mitch Kapor]‘s personal experiences as the founder of Lotus Development Corp., while Mitch wanted to write a more analytical treatise about innovation. “That’s not the book Doubleday wanted to do,” says [Michael Schrage]. Kapor was vacationing in Hawaii and unavailable for comment.
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Alex Beam, Globe Staff

Full text: [Boston Globe (pre-1997 Fulltext)] Aug 31, 1990

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Rumor Devastates Bank of N.E. Stock

It was common knowledge yesterday that the Bank of New England was about to be closed by federal regulators. It seemed as if everyone, from cab drivers to Wall Street investment bankers, was betting that the bank was going to be seized today. It wasn’t true. But rumors of the bank’s demise, which peaked when a Congressional candidate from Springfield yesterday issued a press release lamenting the bank’s fall, pushed BNE’s stock to a new low and forced federal bank regulators to release an unusally blunt denial. “It’s ridiculous,” said Lenora Cross, a spokeswoman for the Office of the Comptroller of Currency, Bank of New England’s chief regulator. “This is a categorical denial. The rumors are just not true.” (excerpt)
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Bailey, Doug

Full text: [Boston Globe] Aug 31, 1990

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Economic, gulf worries send stock prices down

The near-term price of light, sweet crude rose 85 cents to $26.77 a barrel on the New York Mercantile Exchange, while in the credit markets, the yield on the Treasury’s bellwether 30-year bond climbed to 8.98 percent by late afternoon from late Wednesday’s 8.92 percent. U.N. Secretary General Javier Perez de Cuellar arrived in Jordan for talks with Iraq’s foreign minister, but the market saw few other hopeful signs. Reports that Iraq has set new conditions for allowing foreigners to leave the country also increased trader pessimism. The sharp decline in the Dow Jones average triggered one of the New York Stock Exchange’s “circuit breakers” designed to prevent a price freefall. The mechanism bars stock sales connected to index-futures arbitrage until the prices of the stocks involved rise.
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Full text: [Austin American Statesman] Aug 31, 1990

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THE MARKETPLACE

Economic worries growNEW YORK Wall Street’s four-day reprieve from worries about the economy and the Persian Gulf ended Thursday as stock prices fell sharply in response to higher oil prices and rising interest rates. The Dow Jones industrial average fell 39.11 to 2,593.32 after gaining 149.01 points over the previous four sessions. Bond prices closed mostly lower. The price of the Treasury’s benchmark 30-year bond fell 17|32 point, or about $5.31 per $1,000 face amount.
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Full text: [Anchorage Daily News] Aug 31, 1990

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Retail Deposits Showing Gains from Gulf Fears

The Persian Gulf crisis and resulting drop in stock prices are touching off a consumer flight to safety, providing a boost to retail deposits, bankers report.
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Kantrow, Yvette D

Full text: [American Banker] Aug 31, 1990

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Stock Price Makes Barry Run

A hypothesis that the standardization of payments in the US at the turn of each calendar month generally induces a surge in stock returns at the turn of each calendar month is presented and tested. The hypothesis also asserts that returns generally will be greater following the month of December and will vary inversely with the stringency of monetary policy. Empirical results using stock index returns for 1969 to 1986 support the hypothesis. This analysis provides an explanation for the previously documented monthly effect in stock returns and a partial explanation for the January effect. The results also are consistent with a previously documented empirical regularity in the Treasury bill market.
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Bennett, Robert A.

Full text: [United States Banker] Sep 1990

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Stock price makes Barry run (Barry F. Sullivan, Chairman and CEO of the First Chicago Corporation – interview)

A hypothesis that the standardization of payments in the US at the turn of each calendar month generally induces a surge in stock returns at the turn of each calendar month is presented and tested. The hypothesis also asserts that returns generally will be greater following the month of December and will vary inversely with the stringency of monetary policy. Empirical results using stock index returns for 1969 to 1986 support the hypothesis. This analysis provides an explanation for the previously documented monthly effect in stock returns and a partial explanation for the January effect. The results also are consistent with a previously documented empirical regularity in the Treasury bill market.
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Bennett, R.

Full text: [United States Banker] Sep 1990

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Turn-of-Month Evaluations of Liquid Profits and Stock Returns: A Common Explanation for the Monthly and January Effects

A hypothesis that the standardization of payments in the US at the turn of each calendar month generally induces a surge in stock returns at the turn of each calendar month is presented and tested. The hypothesis also asserts that returns generally will be greater following the month of December and will vary inversely with the stringency of monetary policy. Empirical results using stock index returns for 1969 to 1986 support the hypothesis. This analysis provides an explanation for the previously documented monthly effect in stock returns and a partial explanation for the January effect. The results also are consistent with a previously documented empirical regularity in the Treasury bill market.
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Ogden, Joseph P.

Full text: [The Journal of Finance] Sep 1990

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The Intertemporal Relation Between the U.S. and Japanese Stock Markets

A high correlation is found between the open to close returns for US stocks in the previous trading day and the Japanese equity market performance in the current period. In contrast, the Japanese market has only a small impact on the US equities, accounting for only 1% of the changes in US open to close returns. High correlations among open to close returns are a violation of the efficient market hypothesis. In trading simulations, however, the excess profits in Japan vanish when transactions costs and transfer taxes are included. Although the results are statistically significant, they are probably not high enough to profitably trade on in the US. In addition, there is no relation between the performance of the Japanese market and the close to open return in the US.
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Becker, Kent G.
Finnerty, Joseph E.
Gupta, Manoj

Full text: [The Journal of Finance] Sep 1990

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The Effects of Stock Splits on Bid-Ask Spreads

The effects of stock splits on bid-ask spreads for New York Stock Exchange listed companies are examined. Percentage spreads increase after splits, representing a liquidity cost to investors. These spread increases are directly related to decreases in share prices following splits and can explain part, but not all, of the observed increase in return variability after splits. The evidence thus suggests a liquidity cost of stock splits that must be weighed against any other perceived benefits of splits. Such a liquidity cost may validate that stock splits are a signal of favorable information about the firm. It also is shown that the observed increase in return variability after splits is, in part but not entirely, the result of increases in spreads.
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Conroy, Robert M.
Harris, Robert S.
Benet, Bruce A.

Full text: [The Journal of Finance] Sep 1990

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Fund Managers Vary Approach to Market Swing

Measuring the total return variations explained by shocks to expected cash flows, time-varying expected returns, and shocks to expected returns is one way to judge the rationality of stock prices. Variables that proxy for expected returns and expected-return shocks capture 30% of the variance of annual New York Stock Exchange value-weighted returns. Growth rates of production, used to proxy for shocks to expected cash flows, can explain 43% of the return variance. However, because production growth rates, expected returns, and shocks to expected returns are all related to business conditions, the combined explanatory power of the variables – about 58% of the variance of annual returns – is less than the sum of their separate explanatory powers. It is concluded that a large fraction of the variation of stock returns can be explained, primarily by time-varying expected returns and forecasts of real activity.
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Diamond, Jonathan

Full text: [The Journal of Finance] Sep 1990

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FUTURE SPIN

Oil price impact: The stock market is in the rare situation of having its primary influence being oil prices. Crude costs fell sharply last week, so stock prices jumped higher. This direct relationship will last until the Persian Gulf crisis plays out. Then it’s back to the old fundamentals: corporate earnings, interest rates, the federal deficit. Smart stock specialists are keeping an eye on those indicators as well as the Middle East, and many don’t like what they see. The current train of thought: if peace is reached in the Persian Gulf, expect a celebratory rally — followed by a “reality” downturn. Paying the tab: As the superpower amassed its tanks and planes in the Mideast last week, its top diplomats got out their beggar’s cups and prepared to seek a way to pay for the expeditionary force. That spectacle may help to explain why the dollar has been far weaker in this world crisis than in previous ones.
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From Register news services

Full text: [Orange County Register] Sep 3, 1990

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Buyers active at Zero Corp., Hilton

Zero Corp. — On Aug. 17, Director Roger L. Putnam purchased 10,000 shares at $11.13 each. This buy is interesting because of Putnam’s good trading history in Zero Corp.’s shares. His last purchase preceded a 30 percent rise in the stock price over six months. Calfed Inc.: Lew E. Coppersmith, director, indirectly purchased 2,000 shares of common at $10 per share on Aug. 3 and now indirectly holds 4,000 common. Richard M. Greenwood, vice president, purchased 1,200 shares of common at $9.50 per share on Aug. 7 and now directly holds 1,200 common. Chesapeake Industries Inc.: Peter W. Johnson, vice president, acquired by gift 9,500 shares of common at $1 per share on July 31 and now directly holds 39,692 common. Hilton Hotels Corp.: Robert C. Moore, vice president, purchased 500 shares of common at $36.75 per share on Aug. 17 and now directly holds 2,700 common. John V. Giovenco, vice president, sold 20,000 shares of common between $35.63 and $35.38 per share on Aug. 22 and no longer holds shares in the company.
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Special to the Register

Full text: [Orange County Register] Sep 3, 1990

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Stocks Firm In Tokyo

”Because of the Labor Day holiday in New York, many people don’t know what sort of attitude to take to the market,” said Daniel Marull, a trader at Sanyo Securities here. ”We had good volume for the past four days, but it will be very weak today.” Dealers here are focusing on how the United States Federal Reserve and the West German Bundesbank will react to last week’s three-quarters of a percent rise in the Bank of Japan’s discount rate, to 6 percent.
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Reuters

Full text: [New York Times] Sep 3, 1990

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Banks Brace for Impact for FDIC Insurance Boost

The Federal Deposit Insurance Corp.’s plan to boost insurance premiums by more than 60 percent next year is expected to cut short-term earnings and stock prices for many area banks. Stung by the failure of the federal savings and loan insurance fund and the ongoing financial problems of many large commercial banks, regulators hope the proposed increase in fees that the FDIC charges banks to protect depositors will keep the fund viable. But it’s a cost that bank executives say would hurt bottom lines. They also say it’s an expense their customers ultimately would bear. (excerpt)
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Tosto, Paul

Full text: [Minneapolis / St. Paul CityBusiness] Sep 03, 1990

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WEEKLY SCORECARD STOCK GROUP WINNERS & LOSERS Best- and worst-performing industries and companies in each group, with closing stock price, for the week ended Aug. 31. Only stocks trading for $1 or higher are included.

3) Freight, shipping: +7.2% Nortankers Inc. (9): +28.6% 6) Nonferrous metals, coal: -0.9% General Metals (1 5/8): -18.75% TABLE: STOCK GROUP WINNERS & LOSERS
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Full text: [Los Angeles Times (pre-1997 Fulltext)] Sep 3, 1990

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