B of A Recovered Fully, Clausen Tells Holders

BankAmerica Chairman A. W. Clausen told shareholders Thursday that California’s largest bank company has recovered fully from record losses and is in a position to reassert its dominance in the western United States. “The corporation has been turned around,” Clausen said at the annual meeting, held in Los Angeles for only the second time in the history of the San Francisco-based banking company. “We are profitable. A dividend has been reinstated. We are strongly back in our key markets. And we are off to an excellent start on 1989.” (excerpt)
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Frantz, Douglas

Full text: [Los Angeles Times] May 26, 1989

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Salomon agrees to censure by SEC

Salomon Brothers Inc. and the Securities and Exchange Commission have settled allegations that the brokerage firm violated laws governing short-selling on the day the stock market crashed, then failed to promptly provide its books for inspection, the SEC said Thursday. Salomon is one of the biggest investment firms and the first to be implicated for short-sale abuses that many Wall Streeters privately have said aggravated the plunge in stock prices on Oct. 19, 1987, when the Dow Jones industrial average plummeted 508 points. Short-selling is the sale of borrowed stock, used as a strategy by investors who believe the price of a stock will decline. Under rules governing short sales, the strategy cannot be used when a stock price already is falling.
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Chicago Tribune wires.

Full text: [Chicago Tribune (pre-1997 Fulltext)] May 26, 1989

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Owner of Local Security Firm Rocked by Accounting Scandal

THE FLORIDA security company that bought Stamford-based Gleason Plant Security, now faces charges of multi-million dollar fraud that could affect its future fiscal stability, according to some analysts. Sahlen & Associates of Deerfield Beach, Florida, last month fired its founder, Harold Sahlen, and three other executives in the wake of an internal investigation that revealed the firm must write down the value of its accounts receivable by $45 million. Shareholders have sued the firm, which recently changed its name to Globe Security Company, and the fired executives for allegedly violating federal securities laws and fraudulently inflating the price of the company’s stock. (excerpt)
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Kamienski, Mark

Full text: [Across the Board] May 26, 1989

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ON STOCKS DeGroote’s amazing timing provides for profitable trades

The two investments have raised concerns that Laidlaw is becoming a holding company and, especially in the case of ADT, entering uncharted waters, a criticism Mr. [Michael DeGroote] rejects out-of-hand. (Shares of holding companies traditionally trade at much lower profit multiples than operating companies.) Not surprisingly, Laidlaw’s stock price has been in a steady down draft, closing yesterday at $16.
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LEONARD ZEHR

Full text: [The Globe and Mail] May 27, 1989

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COMPANY NEWS; Possible Bid Sends Avon’s Stock Up

Analysts said the fact that the stock did not rise higher suggested that investors doubt that Mary Kay can finance a bid for Avon. They noted that Mary Kay already has about $200 million in debt and about $400 million in total liabilities, mainly because of its leverage buyout in 1985.
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Reuters

Full text: [New York Times] May 27, 1989

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Stock market rallies as interest rates drop

Activity tapered off through the session as many traders got an early start on the long Memorial Day weekend. The markets will be closed Monday. Advancing issues outnumbered declines by about 5 to 2. Volume on the New York Stock Exchange came to 143.12 million shares, down from 154.47 million Thursday. Nationwide volume totaled 169.86 million shares. Edward J. Laux, senior vice president of block trading at Kidder Peabody & Co., suggested that the broader market played catchup this week, to explain why it did better than the Dow industrials. Blue chips have led the rally that has carried stock prices higher since mid-March. Both the blue chips and the broader market have now gained about 11 percent since their March lows.
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Chicago Tribune wires.

Full text: [Chicago Tribune (pre-1997 Fulltext)] May 27, 1989

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Don Bauder

“The driving force behind the stock market in the past year has been record-high (corporate) acquisition and share repurchase activity,” said H. Bradlee Perry of Boston’s David L. Babson & Co. Companies’ main market activities have been leveraged buyouts (groups buying out a company’s stock with debt, often junk debt); takeovers (hostile or otherwise) and buying back their own shares, often to fight or discourage takeovers. That possibility would frighten the takeover BO crowd. “If a business recession develops, companies’ cash flow will decline, and inevitably there will be more failures among leveraged buyouts,” said Perry. And corporations will have less money with which to purchase their stocks. That leaves institutions. Corporate pension funds are the biggest factor among institutions, and Perry, for one, doubts they will be buying. “The tripling of stock prices since mid-1982 has boosted the assets of many corporate pension funds to the point where they are fully-funded or over-funded,” said Perry.
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Don Bauder

Full text: [The San Diego Union] May 28, 1989

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Investors Hoping for Easier-Money Fed Policy to Boost Stock Prices

Rumors of lower interest rates and higher stock prices sparked by an easier credit policy from the Federal Reserve Board have investors hoping that the rumors will become fact soon. The dollar’s strength in the foreign market will probably be the determining factor in the Fed’s decision.
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Full text: [The Atlanta Journal the Atlanta Constitution] May 28, 1989

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WHAT DO FISH AND FOREST PRODUCTS HAVE IN COMMON? TIMING

That picture sounded pretty good a year ago when Arctic Alaska Fisheries Corp., a two-year-old Seattle company, first sold its stock to the public. But investors who bought the stock at that time took a beating. The stock, which had closed at $8.50 on May 12, shot up to $10.25 a week later, a 21 percent gain. Last week, as company officials told the Arctic story to the investment community in New York, the stock rose another 75 cents to $11, giving it a 29 percent increase in two weeks. [Allen] Strand described Arctic as “well positioned to increase its market share in the North Pacific seafood catching and processing business. Moreover, domestic consumption of seafood continues to increase” and the company’s then-current stock price is “undervalued based on future growth prospects” and “more than adequately discounts the known negatives,” he wrote.
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RICHARD BUCK

Full text: [Seattle Times] May 28, 1989

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We Shouldn’t Envy Canada’s Health System; Free Ride for Chrysler

The reason for breaking the ”taboo” on national health insurance lies in another part of your article. The Financial Accounting Standards Board has proposed that all companies be required to account, on their balance sheets, for the vast liabilities they have committed themselves to pay for future retirees’ health care. The House Select Committee on the Aging estimates that it would come to some $2 trillion for the 500 largest corporations alone. When this is phased in by 1992, stock prices and bond ratings figure to slide as companies are revalued based on these newly listed liabilities.
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Full text: [New York Times] May 28, 1989

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Wall Street Hopes for Easier Credit

Hopes are spreading on Wall Street that the Federal Reserve will lower interest rates and raise stock prices in the summer of 1989, courtesy of an easier credit policy.
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Full text: [Boston Globe] May 28, 1989

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CPI’s Poison Pill Protects Nest Egg

CPI Corp. has adopted a poison pill plan to discourage possible takeover attempts aimed at raiding the firm’s swollen coffers. CPI, a St. Louis-based consumer services company, earlier this month adopted a shareholder rights plan designed to thwart certain hostile takeover attempts. Under the plan, the shares of any person or group attempting to gain a controlling interest in CPI would be diluted through a preferred stock offering, according to an 8-K filing with the Securities and Exchange Commission. The stock offering would be triggered by an individual or group acquiring 20 percent or more of CPI’s outstanding stock or an announcement of intention to acquire 30 percent of outstanding stock. The rights offering, if enacted, would not interfere with any merger or other business agreement approved by CPI management, according to the document. (excerpt)
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Moore, Rob

Full text: [St. Louis Business Journal] May 29, 1989

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Rally’s Endurance Doubted

Although profitable times have returned to Wall Street, not all institutional investors believe that good times will last. The market’s surge has led many participants to claim that the market is on a continuing upswing. Some say the Dow Jones Industrial Average could attain 3000 this year. The Dow has risen more than 14% from its December 30, 1988, close of 2168.57. After a drop in US producer prices and declines in interest rates, it reached a post-crash high of 2502.02 on May 22, 1989. Some of Wall Street’s prominent portfolio strategists are changing their recommended asset mix, but more than half of the investment executives interviewed by Pensions & Investment Age were far from bullish. Merrill Lynch & Co., Goldman, Sachs & Co., and Salomon Brothers Inc. have recommended increasing equity allocations by reducing cash. Wall Street’s predictions do not seem to be impressing many pension fund executives and their investment managers.
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Price, Margaret
Ring, Trudy

Full text: [Pensions & Investment Age] May 29, 1989

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Convertibles Revived Investors Embrace Flood Of New Issues

Sensing an opportunity and a strengthening equity market, nearly a dozen companies have issued more than $660 million of convertible securities since the first week of May 1989, bringing new vitality to the slumping convertibles market. The issuers include small growth companies and larger firms. Investors are purchasing securities in the search for attractive equity alternatives, and many recent issues have been oversubscribed. Convertibles are attractive for issuers that can obtain a 25% to 30% premium on their stock price and a low coupon. The most recent issuers are using the proceeds to retire high-cost debt, build working capital, expand operations, and make acquisitions. There are several factors that account for the resurgence of convertibles, including the recent strength of the equity market and softening interest rates. Institutional investors are eager to add to their portfolios, but several money managers say they cannot find enough attractive convertibles to meet their needs.
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Parker, Marcia

Full text: [Pensions & Investment Age] May 29, 1989

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Dollar Rides Rising Tide

Above all, the Federal Reserve could drive down the dollar’s value by relaxing its anti-inflation policy. But Fed officials indicated that fighting inflation remains their top priority. ”It would not be a good idea to upset price stability in the pursuit of dollar devaluation,” Wayne Angell, a Fed governor, said. Most of Mr. [Thomas J. Palladino]‘s numerous trades were based on the assumption that the dollar would keep rising. ”No one thought it would get above 1.90 marks,” he said, ”and once it did, there was a willingness to try to push the dollar as high as possible.” ”Some foreign businessmen needed dollars to finance deals in this country, and some American corporations took the opportunity to convert money earned abroad into dollars,” Mr. [John Hackett] said. ”But they have done so with trepidation because nothing has changed that much in the U.S. economy.” Looking for Explanations
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UCHITELLE, LOUIS

Full text: [New York Times] May 29, 1989

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Look At The Crack Spreads

Barry Sahgal, director of research at Ladenburg, Thalmann & Co. (New York), who has been covering the energy industry for 15 years, says that the independent oil refiners are experiencing a surge in profits. This brighter outlook can be expressed in a measure called the “crack spread,” which is the difference between the forward prices for gasoline and crude oil for the same month, as quoted on the New York Mercantile Exchange. Sahgal explains that the crack spread represents what would be the gross margin in other industries, and notes that the profitability of the refining industry is directly correlated to the spread. The crack spread widens when gasoline prices rise faster or fall more slowly than crude’s price. Since December 1988, it has widened dramatically, from under $4 to over $9.50. The independent refiners clearly receive the greatest benefit from this. Investments in the category of independent refiners that may be worth considering include Sun Co. and Diamond Shamrock R&M.
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Chakravarty, Subrata N.

Full text: [Forbes] May 29, 1989

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LIN Puts a Profitable Spin on the TV Buyout Picture

The decision last week by LIN Broadcasting Corp. to spin off its group of seven television stations into a separate company strengthens the prospects that LIN, which will retain its valuable cellular phone business, will be acquired. That, analysts agree, means that Manhattan-based LIN remains a strong stock buy. Trading last Friday over the counter at 101, up 4 3/4 the day after the planned new subsidiary was announced, LIN is described by analysts as reasonably priced. The stock closed the week at 103 1/2, up 5, or 5.1%. (excerpt)
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Beschloss, Steven

Full text: [Crain's New York Business] May 29, 1989

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Essef’s Picture Brightens as Orders From IBM Revive

With Essef Corp.’s biggest customer placing orders once again, the company’s stock appears undervalued, two local analysts say. But what will happen beyond the next few quarters is anybody’s guess for the Chardon-based maker of plastic products used in computers, business machines, water treatment systems, swimming pools and spas. Last year, International Business Machines Corp. sharply curtailed its orders for Essef’s line of plastic housings for small computers. As a result, sales in Essef’s business machine and computer division tumbled 41% in the fourth quarter of fiscal 1988, which ended Sept. 30 of last year, and 65% in the first quarter of the current fiscal year, compared with the year-earlier periods. (excerpt)
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Barnes, Jon

Full text: [Crain's Cleveland Business] May 29, 1989

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The Dollar Comes Roaring Back

With the US dollar at its highest level since 1986 and Federal Reserve and Bush Administration still undisturbed by the dollar’s rise, traders predict the currency will gain an additional 10% or more in weeks ahead. The rising dollar can only help the Fed’s tight-money campaign to limit inflation and slow the economy. Merely stabalizing the dollar at its current level, around 1.97 deutsche marks and 139 yen as of May 17, 1989, will reduce the US inflation rate by 2% by 1991. Unless the Fed lets interest rates fall, which is highly unlikely, the slowing economy may restrain imports and keep the trade deficit from worsening. With the dollar and US bond and stock prices all rising, foreign money managers are worrying that they will lose the chance to reap large capital gains unless they move now. Although many economists warn that the rise in the dollar may trigger higher interest rates and an ensuing recession, investors do not want to miss the gains possible now.
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McNamee, Mike
Glasgall, William

Full text: [Business Week] May 29, 1989

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A Soft Landing Will Send the Market Soaring

In April and May 1989, as the evidence of a slowing economy started to grow, the Dow Jones industrial average climbed over 200 points, or about 10%. About 1/4 of that move occurred May 12, when the market surged 57 points on some of the heaviest volume seen all year. The reason for the rally was simple: The producer price index, a key inflation indicator, showed a 5.5% annualized rate of increase for March and April, compared with the frightening 12.6% increase for January and February. The possibility of a “soft landing” appears to be driving the market. Proponents of the soft landing theory argue that the economy is slowing dramatically and the Federal Reserve will soon respond and that, with the dollar so strong, the Fed can now allow interest rates to fall. Due to the strong dollar, foreign buyers, who have been scarce since the October 1987 crash, want to own dollar-denominated securities again. Still, a new bull market will depend on a soft landing.
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Laderman, Jeffery M.

Full text: [Business Week] May 29, 1989

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