Forex Trading System
During the week of Aug 20, 1990, conditions on the NYSE are described as being near the riot point. Despite control measures implemented to avoid panic, stock prices continued to go down.
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Francis, David R
Full text: [The Christian Science Monitor] Aug 27, 1990
What has happened, according to [Warren Smith] and some other analysts, is that stock prices rose well beyond their “fundamental worth” this spring and summer. The Dow peaked at just over 3,020 in mid-July. Then the slowness of the economy became clearer. And Iraqi President Saddam Hussein ordered his troops into Kuwait, sending the price of oil soaring. Economists marked down their forecasts further, some seeing a recession ahead. Stock analysts began to suspect their earnings predictions for various corporations would be too optimistic. Except for the Iraq oil shock, both Smith and [H. Bradlee Perry] figure that share prices at the moment are not far out of line with “fair value.” The price to earnings ratio (P/E ratio) of broad stock averages, using earnings for the past 12 months, is about 13. The long-term average P/E ratio is about 13.5. The rise in oil prices, if it brings an economic slowdown, could knock down earnings further. The P/E ratio got under 9 in 1982 when there was a “negative market psychology,” Perry says. Much depends on what happens in the Middle East – a long siege of Iraq, a shooting war, or a quick negotiated settlement.
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Full text: [The Christian Science Monitor (pre-1997 Fulltext)] Aug 27, 1990
Since January, when Landmark Bancshares Corp. announced plans to buy Pembroke Bancshares Inc. of Kansas City, its stock price has dropped 40.6 percent. That drop is the main reason the transaction, which included a stock exchange, was called off Wednesday by Landmark and Pembroke, the parent company of Union Bancshares Inc. “Just look at what’s happened to the price of the stock since we started talking (almost a year ago),” said Jerry Green, chairman of Pembroke. “Market conditions just aren’t conducive for these things.” (excerpt)
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Sahm, Cathy
Full text: [St. Louis Business Journal] Aug 27, 1990
Engineered Support Systems Inc. has found an oasis for its lagging defense business in the Saudi Arabian desert. Engineered Support manufactures water purification and distribution systems. According to reports, representatives of the U.S. military have asked the firm to produce more of that equipment for the troops stationed in Saudi Arabia. As a result, the company’s stock has jumped more than 156 percent in value in less than a week. Aug. 15, Engineered Support stock was selling for $2.63 a share and by Wednesday, Aug. 22, it was selling for $6.75 a share. (excerpt)
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Scott, Mac
Full text: [St. Louis Business Journal] Aug 27, 1990
NEW YORK – The steep decline in stock prices this summer has left investors staring into the jaws of what some say may be Wall Street’s first sustained bear market in nearly a decade. That debacle produced a 36 percent drop in the Dow Jones industrial average, enough to rank prominently on any list of modern-day market declines. But almost all the carnage occurred in less than two months, and stocks began to recover quickly thereafter en route to new highs. For an undisputed example of the kind of long, debilitating slide for which classic bear markets are famous, one has to go back to 1981-82, before the big boom of the ’80s on Wall Street was ready to start.
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Full text: [Seattle Times] Aug 27, 1990
”The market has clearly been oversold, so a modest technical rebound is natural,” a trader said. ”But the major investors are still very cautious.” Today’s one-day gain was the ninth largest in the Nikkei’s history. The index is now 35 percent below its record high of 38,915.87, set on Dec. 29. ”Dollar-yen trading will not be active here today,” said Kaoru Kondo, a dealer at Security Pacific National Bank after the morning session ended. ”Instead, activity will be led by cross-trading again.”
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Reuters
Full text: [New York Times] Aug 27, 1990
The total of 250.4 million shares traded was the third-heaviest volume, not the heaviest, since the day after the 190-point plunge in October 1989.
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Full text: [New York Times] Aug 27, 1990
The political crisis in the aftermath of Kuwait’s invasion by Iraq will indirectly impact investment portfolios, a spot sampling of insurers indicated. According to Michael Keran of Prudential Life Insurance Co., the effect of higher oil prices will not be immediate but will start in 1991 and occur over the next 2 years. In the short run, higher oil prices will drive up long-term interest rates and depress stock market values and, as a result, insurers’ assets. Insurance companies could benefit from holding debt because a fall in interest rates early in 1991 would increase the value of their investment, while a fall in stock prices would push down the value of their holdings. Provident Mutual Life Insurance Co.’s Stanley Reber indicated that long-term interest rates have already begun to climb and that inflationary fears have contributed to the climb. Insurers with common stock holdings will be affected because of pressures on the stock market. Roger Nastou of John Hancock Mutual Life Insurance Co. suggests that the Middle East is a problem to the extent that it exacerbates a recession.
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Connolly, Jim
Full text: [National Underwriter] Aug 27, 1990
“What’s happening is a liquidation after a long period of overheating,” said Osamu Tanaka, president of NB Investment Technology, a Tokyo-based investment advisory firm. “It would have happened last year, but the imbalance of demand and supply distorted fundamentals.” In the heyday of what analysts already are remembering fondly as Tokyo’s “super bull market,” stocks went sky high in an investor environment blessed with the “triple merits” of low interest rates, cheap oil and strong yen. Corporations and institutional investors were laden with huge amounts of cash that invariably found its way into domestic stocks, pumping up share prices and creating the illusion that the Nikkei would climb forever. Moreover, Finance Ministry officials have lost much of their ability to steer the market with the easing of market regulations since the mid-1980s. Futures and options on the Nikkei average that are traded in offshore markets now have an unpredictable-and uncontrollable-effect on stock prices in Tokyo.
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KARL SCHOENBERGER
Full text: [Los Angeles Times (pre-1997 Fulltext)] Aug 27, 1990
A deal to sell Union Bancshares Inc. to St. Louis-based Landmark Bancshares Corp. has been called off after a drop of almost 40 percent in the stock price of the St. Louis bank holding company. Officials with the two companies announced Aug. 22 that they had mutually decided to end the planned sale, two months before the deal was scheduled to close. Jerry Green, chairman and co-owner of Union Bank Downtown, said that the drop in Landmark’s stock price from 15 5/8 in January to 9 1/2 as of Aug. 21 was the main factor in the decision to call off the sale agreement. (excerpt)
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Anonymous
Full text: [Kansas City Business Journal] Aug 27, 1990
Illinois Central Corp. made a rocky return to independent public ownership last week, hut the railroad holding company appears headed for the fast track. Although a well-known company with a long local history, Illinois Central is a newly traded concern, having been spun off to shareholders by parent Prospect Group Inc. Before its Nasdaq over-the-counter listing on Tuesday, analysts estimated that Illinois Central stock would trade at $18 to $20 a share. The issue never reached that point. On Tuesday, it closed at $15, and has since hovered in the $13-to-$15 range. (excerpt)
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Elstrom, Peter J. W.
Keefe, Lisa M.
Full text: [Crain's Chicago Business] Aug 27, 1990
As financial markets open Monday amid a continuing scramble over the Mideast crisis, investors are expected to continue a crisis-investing pattern that has split them into three groups: Those hunting for safe havens, those seeking buying opportunities and those willing to ride it out. Energy and gold stocks have been among the few winners since Iraq invaded Kuwait Aug. 2, while traditional safe havens such as the dollar and bond funds have fallen along with the overall markets. The bond funds have been sinking on expectations that U.S. interest rates are heading higher. Referring to the natural resources funds with stock in gold and oils, [John] Rogers of Ariel company said: “I think it’s a little too late. Investors should have done it six weeks ago. They’re trying to do it once all the information is already out. The stock prices already reflect all that information.”
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Steven Morris
Full text: [Chicago Tribune (pre-1997 Fulltext)] Aug 27, 1990
A world financial community that barely a month before was characterized by peace and confidence has been plunged into uncertainty and fear of war by Saddam Hussein. The initial shock of Iraq’s invasion of Kuwait fell heavily on US markets, but as the Persian Gulf crisis has unfolded, the action has shifted overseas. The economic impact has been most jarring not in Japan, where the market has suffered most of the year, but in Europe, where markets have had spirited gains largely as a result of the opening of Eastern Europe. The Saddam Hussein market has been most keenly felt in Vienna, but it has also had an impact in Paris and in West Germany. Continued caution is the byword in world markets. It seems likely that gold will regain its traditional role as an inflation hedge. Smart investors may do well to continue to bet on Eastern Europe’s revival.
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Weiss, Gary
Full text: [Business Week] Aug 27, 1990
The median dividend yield of the top 50 banks is currently 7.5%, more than double the 3.7% yield for the Standard & Poor’s 500 stock index, the most often used measure of the overall equity market. The yield, which moves inversely to prices, is calculated by dividing the stock price by the annual dividend. Highest Return at Midlantic “Shorting high-yielding stocks is a relative expensive pursuit because the individual or corporation instituting the sale must make good the dividend to the buyer. Thus, in some cases the stocks drop more than 10% in order for the seller to cover the carry costs,” said Richard X. Bove, an analyst for Dean Witter Reynolds Inc. Covering Short Positions This suggests that if money-center institutions in particular maintain their dividends, as Mr. Bove expects, “substantial pressure” will build on short sellers to cover their positions before the next dividends are announced for these stocks. That would lead to the acquiring of stock, thus giving prices a lift. END
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GORDON MATTHEWS
Full text: [American Banker (pre-1997 Fulltext)] Aug 27, 1990
And days like yesterday and last Friday, when stock prices rose sharply, are perfect for putting a hedge strategy into place. Higher prices not only increase the value of an investor’s shares, but they also reduce the cost of protecting those shares with options. Stock options give holders the right — but not the obligation — to sell (a put option) or to buy (a call option) individual stocks or indexes that approximate an entire portfolio at a fixed “exercise” price for a specified period. Put options gain in price when the underlying stocks or indexes decline in value, while call options increase in price when the underlying stocks or indexes appreciate. Harrison Roth, option strategist for Cowen & Co. in New York, says that to some extent using put options to hedge a stock-market investment is similar to buying homeowner’s insurance. “The exercise price can be considered the value of the policy in case disaster strikes,” Mr. Roth says. “The life of the put, between the date of the put and its expiration, can be considered the term of the policy. The amount paid for the put is the premium,” he adds.
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Angrist, Stanley W
Full text: [Wall Street Journal] Aug 28, 1990
A jury in London convicted Ernest Saunders, the former chairman of Guinness PLC and three co-defendants of charges arising from the company’s 1986 takeover of Distillers Co. Saunders allegedly conspired to inflate the company’s stock price to help win its bid for Distillers Co.
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Hudson, Richard L
Full text: [Wall Street Journal] Aug 28, 1990
The longest-running financial scandal of the [Margaret] Thatcher era neared a conclusion as a London jury convicted the former chairman of Guinness PLC and three co-defendants of charges arising from the company’s 1986 takeover of Distillers Co. After a three-year investigation and a trial of more than 100 days, a Southwark Crown Court jury found former Guinness Chairman Ernest Saunders, 55 years old, guilty of 12 of 13 charges against him. Mr. Saunders, who resigned from Guinness in 1987 after the scandal broke, allegedly conspired to inflate the company’s stock price to help win its #2.53 billion ($4.91 billion) bid, made in late 1986, for Distillers, a Scottish spirits company. The guilty verdict, though nearly four years in the making, will enhance the oft-tarnished reputations of British financial regulators. After the scandal broke, Mrs. Thatcher’s government accelerated adoption of a broad series of reforms in U.K. legislation on financial crime, insider trading and corporate law. The Guinness case was the most far-reaching undertaken by the government’s new white-collar crime squad. And in London’s financial district, it became a major test of the government’s mettle.
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By Richard L. Hudson
Full text: [Wall Street Journal] Aug 28, 1990
Prices of long-term Treasury bonds climbed more than 1 1/2 points for a gain of more than $15 for a bond with a $1,000 face amount. The issue’s yield, which moves in the opposite direction of its price, eased to 8.99% from 9.15% on Friday. Tax-exempt municipal bonds, high-grade corporates and mortgage-backed bonds followed the Treasury market, posting moderate to big gains. Most junk bonds, which were boosted by rising stock prices, ended between 3/4 and one point higher as the Dow Jones Industrial Average surged 78.71 points to end at 2,611.63. Junk bonds are speculative-grade bonds that carry low ratings or no ratings at all. But bond market activity was very light yesterday. Traders said that yesterday’s rally may have been exaggerated by a large number of speculators who were buying notes and bonds to cover short sale positions. In a short sale, investors sell borrowed securities and later seek to make a profit by replacing what was borrowed with cheaper securities. Essentially, these traders were betting that prices would fall.
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Mitchell, Constance
Adler, Lynn K
Full text: [Wall Street Journal] Aug 28, 1990
Take Motorola Inc.’s ambitious drug-testing policy, discussed here a couple of months ago. The company hasn’t backed off from its intended Jan. 1 start-up, but a few employees called to say that support is far from the 80% reported here. In Austin, Texas, some Motorolans have teamed up with counterparts from Texas Instruments, the other major U.S. employer to urine-test all workers, to lobby the City Council to prohibit the policy there. About 7,000 work for the two companies in that liberal city. So far, however, the councilman sponsoring the ban has yet to line up a majority to pass it. Now it isn’t expected to make the council agenda until at least October. Meanwhile, fickle public opinion seems to have downgraded drugs a few notches on the crisis meter, as old favorites war and unemployment stage a comeback. Franklin Savings Association of Kansas still is in federal conservatorship, awaiting a court ruling after a hearing in July. The once-burgeoning thrift was taken over by regulators on Feb. 16 when they alleged that its sophisticated hedge strategy was masking insolvency. John Scowcroft, the 36-year-old University of Chicago “quant” who was second-in-command of the brash institution, says he hopes to be back in the saddle along with Chairman Ernest Fleischer when a federal district judge rules shortly. Meanwhile, the holding company’s been paying him enough to get by, not the $524,000 (half in stock) he made in 1989. And the type of mortgage-backed securities that Franklin relied on, called REMICS, have shinnied in the volatile investment climate of recent weeks. Other financial institutions whose leaders have graced this space have had a similar rocky flight. About the time two executives of Chicago’s Continental Bank were quoted here saying their high-leverage transaction financing was right for the times, Forbes magazine reported it was the wrong strategy. Continental had a fit, but so far, Forbes is more right. And Security Pacific Corp. of Los Angeles, which continues to creep up on J.P. Morgan for the No. 4 slot among U.S. banks (it hasn’t made it yet, despite our premature crowning), is exasperatingly looking for a way to put some pounds on its withering stock price. The Southern California real-estate market may have to show some muscle in support of the aggressive home lender.
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Ferguson, Tim W
Full text: [Wall Street Journal] Aug 28, 1990
Stocks prices have been swinging wildly since Iraq invaded Kuwait Aug. 2. Most of the big moves have been down, Monday’s broad rally notwithstanding. Should investors wait out the storm? Or does volatility create investment opportunities? Stephen Leeb, editor of the investment newsletter Personal Finance takes the bullish approach. He spoke Monday with USA TODAY’s Paul Wiseman. PHOTO;b/w,Jennifer Jecklin(FP,Stephen Leeb,F1) When markets are extremely volatile on the downside, as they have been lately, that tends to be a buying opportunity. When investors are dumping stocks emotionally, it’s time to enter the fray.
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Paul Wiseman
Full text: [USA TODAY (pre-1997 Fulltext)] Aug 28, 1990