Q. & A.: How is crisis affecting economy?

In addition, an increasing number of experts say the GNP criteria for a recession are no longer valid. In much of the country corporate profits are declining, companies are downsizing, home prices are flat or falling, and retail activity is slowing. If that’s not a recession, say some economists, what is? Q.Is the rising price of oil really hurting the entire economy? A.Yes. The nation’s economy was heading downward before the Persian Gulf crisis, but Iraq’s surprise invasion of Kuwait and the Western world’s response sent oil prices skyrocketing. Many economists believe the recent rise in oil prices will push consumer prices higher and cause companies to scale back even further, resulting in negative GNP statistics in the third quarter. That trend will continue into the final period of the year if a quick and peaceful settlement isn’t reached. Q.What is the relationship between stock prices and the Persian Gulf situation? A.The Persian Gulf crisis has been directly responsible for the upheaval on Wall Street. Because so much of the US economy — and its corporations — turns on the price of a barrel of oil, investors are very nervous about the potential for war in the region. Traders continue to look for any sign of possible resolution, or more strife, and the markets likely will remain turbulent until it is resolved. Q.If a war does break out, what will happen to the price of oil? A.Plain and simple, prices will rise to uncharted heights. The possibility of a successful invasion of Saudi Arabia by Iraqi strongman Saddam Hussein would be more than traders could bear. It would give him control of 45 percent of the world’s proven oil reserves, and virtual control over the economies of scores of industrialized nations. Some economists believe oil prices could reach $40 a barrel if war erupts. On Friday, West Texas Intermediate, the benchmark US crude, closed at $28.63 for September contracts. Q.Are we overreacting? If a diplomatic settlement is reached, will oil prices fall back and things return to normal? A.We are not overreacting.
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Russ Stanton :The Orange County Register

Full text: [Orange County Register] Aug 19, 1990

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World Markets; The Shine’s Off Madrid

”Investors have not cottoned on to the fact that there are good underpinnings for the market,” said Richard Reid of UBS-Phillips & Drew in London, which is underwriting a major corporate issue in Spain soon. ”We think there is a tendency to misread the signals in Spain.” What has happened to Spain is what has happened to stock markets around the world. Since the invasion of Kuwait, nobody really wants to look at stock markets. What appeared to be a good thing a month ago no longer appeals. Equities are ”out.” ”I am optimistic,” said Juan Manuel Redondo, chief economist at ABA, a brokerage house in Madrid. ”I’m bullish on the Spanish economy. But the scenario now is totally different. I think it is better to wait. It is better to wait in all markets.”
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Fuerbringer, Jonathan

Full text: [New York Times] Aug 19, 1990

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Wall Street; How the Market Is Treating Energy Stocks

McDermott International, an energy-services company that was widely expected to lose 25 cents in the last quarter, reported a loss of $1 on Aug. 10. Its stock fell 7 percent, to $30.75 by Friday’s close. On Tuesday, Sundowner Offshore Services Inc., a startup that went public in June, reported quarterly earnings of 15 cents, 4 cents shy of its underwriters’ estimates, precipitating a one-day, 13 percent drop in the stock price, to $11.375.
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Cowan, Alison Leigh

Full text: [New York Times] Aug 19, 1990

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Sears struggles to fit the way people shop

When Sears officials acknowledged Friday that they were considering further job cuts in their efforts to streamline the 525,000-person company, industry experts said the cuts probably must number in the thousands before Sears will gain sufficient savings to remain competitive. Much of that pressure comes from Sears’ stock price, which has fallen in the last year from a high of nearly $47 a share to a low Friday of $28.87 on the New York Stock Exchange, $10 a share lower than its “book value” of about $38 a share. Based on Friday’s price, Sears, with about 343 million shares outstanding, has a public-market value of about $10 billion, although its private-market value would be several billion dollars higher. One of them, Sandy Timmermann, 45, of Chicago, typifies the customer whose loyalty is acknowledged even by critics as one of Sears’ strengths. “I only buy Sears appliances,” Timmermann said, and she always returns to Sears “because they have better products.”
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Marianne Taylor and Stephen Franklin

Full text: [Chicago Tribune (pre-1997 Fulltext)] Aug 19, 1990

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Program Trading’s Share of Big Board Volume Declines

At 9:53 a.m. on Aug. 3, a “circuit breaker” designed to restrict program trading went into effect after the Dow Jones Industrial Average fell 50 points in reaction to the Iraqi invasion of Kuwait. The restriction requires index-arbitrage traders to wait for stock prices to rise from previous trades before executing the stock side of their transactions. Another circuit breaker called the sidecar went into effect at 1:19 p.m. when September futures on the S&P 500 index showed a loss of 12 points, the Big Board said. The sidecar, a special Big Board computer file, handled program trading orders for a five-minute period. The Big Board said Bear Stearns & Co. sold 683,000 shares in program trading for its own account while Susquehanna Investment Group sold 535,000 shares between 1 p.m. and 2 p.m.
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By Peter Pae

Full text: [Wall Street Journal] Aug 20, 1990

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Polly Peck Chief Backs Off Earlier Hint of a Buy-Out

In a change of heart that torpedoed his company’s stock price Friday, Asil Nadir, the mercurial chairman and chief executive of the British food and electronics concern, said he won’t be taking his company private after all. His decision came five days after he announced that he might make a bid — valued by analysts at about #1.3 billion ($2.49 billion) — for the 74% of the company he doesn’t already own.
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Full text: [Wall Street Journal] Aug 20, 1990

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Schield: In time with economy

[Marshall Schield] has not only persevered but prospered. The Schield group now has five mutual funds, all but one of which – Schield Progressive Environment – uses his market timing system. Like many market timers, Schield looks at the economy first, the stock market second, and individual stock picks last, on the assumption that the overall direction of the stock market influences stock prices more than a company’s individual situation.
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Full text: [USA TODAY (pre-1997 Fulltext)] Aug 20, 1990

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Blackout Monday Joins Black Monday

The Merc’s crude oil futures contract is the most-watched indicator of world crude oil prices. Iraqi leader Saddam Hussein unleashed bears at the NYSE, bringing the circuit breakers into play. But bulls invaded the Merc, where oil prices have soared and trading volume has set two records. There’s a “very strong” linkage between oil futures prices and oil company stock prices, says George Friesen, vice president and international oil analyst of Deutsche Bank Capital in New York. An increase of 75 cents to one dollar on the Merc would cause oil equities to rise, he says, and oil company issues are well up from their pre-invasion levels. An oil trader in Houston dismisses Blackout Monday as “not an overwhelming inconvenience.” He was able to switch his risk-hedging transactions to the International Petroleum Exchange in London, which closes only 10 minutes before the Merc despite the five-hour time difference.
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Full text: [The Christian Science Monitor (pre-1997 Fulltext)] Aug 20, 1990

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With Glazer Threat Gone, Harley Executives Sell Shares

Six executives of Harley-Davidson Inc., freed of their concerns that unwanted suitor Malcolm Glazer might seize control of the Milwaukee-based motorcycle manufacturer, plan to sell 320,000 of their shares, or 16.8 percent of management’s stock in the firm. However, because of the recent slide in the price of a share of Harley stock, the executives have sold only 15,000 shares so far, said James Paterson, president and chief operating officer of Harley’s motorcycle division. “Although we were trying to act as a group just so we didn’t screw up the market, we still are a bunch of individuals making the decision,” Paterson said. (excerpt)
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Kirchen, Rich

Full text: [The Business Journal] Aug 20, 1990

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Claire’s Boutique finds itself in fashion

“I think we’re as recession-proof as you can get,” boasted Rowland Schaefer, 73-year-old chairman of this unusual Miami-based costume jewelry chain. “We may not do as spectacularly in bad times, but we’ll be stable. Sales increased 50 percent in Flint, Mich., during the worst of the 1982 recession. The same thing happened in Peoria, Ill., after the city’s biggest employer ran into rough times. We opened in Texas in (the middle of the oil bust of) 1983 and did very well.” Shrugging off some experts’ opinions, Schaefer said retailing’s future will continue to lie in the traffic drawn to regional malls. To prove it, he’s gone on a lease-signing spree. From 243 stores in 1985, [Claire]‘s will end this year with 981 and minimal debt. In Tampa Bay alone, Claire’s doubled its stores to 12 in the past year. COLOR Racks of jewelry and high-intensity colors and lighting dominate the new look of Claire’s Boutique at Tyrone Square Mall; The old look of Claire’s Boutiques was called a “beige box” motif; The number of stores have increased from 1987,;; projected to be 1,000 by the year 1991, the annual sales are shown from 1985, projected through 1991, rising every year and the fluctuation in stock prices from March 1985 through January 1990 is also charted on a graph
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MARK ALBRIGHT

Full text: [St. Petersburg Times] Aug 20, 1990

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McDonnell Douglas’ Future Shifts to Douglas Aircraft

Speculation about the direction of profits at McDonnell Douglas Corp. is centered almost entirely around what is happening at its Douglas Aircraft division in Long Beach, Calif. According to the speculation, Douglas is either going to bolster the company’s bottom line, which has been sagging as a result of military spending cuts, or its production problems will continue and drive McDonnell Douglas into further financial trouble. Some aerospace analysts predict that a financial turnaround for McDonnell Douglas, a military and commercial aircraft manufacturer, might begin in this year’s fourth quarter with deliveries of the MD-11 jetliner. (excerpt)
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Scott, Mac

Full text: [St. Louis Business Journal] Aug 20, 1990

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Difficulties Cloud New Sky Plans for Follow-Up to ‘Lady in White’

It’s going to take a giant leap forward to leave New Sky Communication Inc.’s troubles behind. Since its inception in 1985, the local movie production company has experienced disappointing box-office returns for its first feature, “Lady in White,” difficulties in raising funds for new films, a plummeting stock price and subsequent removal from the over-the-counter stock exchange, and disgruntled investors who wonder where their money has gone. New Sky’s latest hope is “The Giant,” an $18 million movie biography of Michelangelo that has yet to start production. Many of its 7,000 shareholders remain skeptical. (excerpt)
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LeBeau, Christina

Full text: [Rochester Business Journal] Aug 20, 1990

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Bellevue Securities Dealer Fined for Overcharging

Bellevue-based securities dealer Kochcapital Inc. and its president, Russell Koch, have agreed to pay a $20,000 fine to settle charges that they overcharged customers by up to 64 percent on shares in two penny-stock companies. Kochcapital and Koch also agreed to pay restitution to 71 customers to whom the firm sold stock in American Holdings Inc. and Barclays Venture Corp. between July and September 1988. The complaint was brought by the National Association of Securities Dealers, whose staff estimates that Kochcapital netted more than $89,000 in “excess profit” through hidden charges on the sales. (excerpt)
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Grunbaum, Rami

Full text: [Puget Sound Business Journal] Aug 20, 1990

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MAI Battling Back From Prime Merger Mess

TUSTIN — Having absorbed a $25 million loss relating to last year’s foiled takeover of computer industry competitor Prime Computer Inc., MAI Basic Four Inc. might have thought that Wall Street would have forgiven it by now. Apparently not. MAI, posting lower quarterly revenues than last year in an effort to move into the systems-software market, has seen its stock price crumble by more than 50% in the last nine months, including a 17% drop in August. After showing $4.5 million in profits on about $120 million in sales in the first half of 1990, MAI saw a soft domestic market and low margins produce a $200,000 loss for the third quarter ended June 30, despite an impressive $97 million in sales. (excerpt)
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Rechtin, Mark

Full text: [Orange County Business Journal] Aug 20, 1990

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Tokyo Stock Prices Decline

”The cash market is being led by futures,” Ross Rowbury, a senior broker at Sanyo Securities, said after the morning session ended. ”Volume is pitiful. Very small lot selling and buying can push the market either way,” he added. ”There is little reason to buy now,” a foreign broker said before the midday close. ”People are cutting losses where they can.”
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Reuters

Full text: [New York Times] Aug 20, 1990

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Market Place; Havens Are Scarce in Current Slide

”There is hardly any place to hide,” said Suresh Bhirud, the chief strategist for Oppenheimer & Company. ”There is weakness across the board.” ”For a bottom, you need a sell-at-any-price mentality,” he said. ”You haven’t seen fear on the tape yet. There are a lot of blocks for sale, but they pull them when they don’t get bids.” ”The psychology on earnings,” Mr. [Thomas Doerflinger] said, ”was that in the first quarter, people were braced for the worst, and grew bullish when it didn’t happen. But maybe going into the second quarter, investors became complacent.”
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NORRIS, FLOYD

Full text: [New York Times] Aug 20, 1990

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Mideast Turmoil Is Salt in Wound of Tokyo Market Securities: Even before Iraq invaded Kuwait, fear of inflation pounded the market all year. The current woes contrast with 1987-89′s super-low interest rates and surge in stock prices.

Even without the Persian Gulf crisis, conditions affecting the Tokyo stock market have changed fundamentally from the 1987-’89 era of super-low interest rates and booming stocks, according to Kenji Mizutani, managing director of Tokai Bank. A weakening of the yen contributed to the January-March stock plunge, and the currency skidded again right after the Iraqi invasion. But the Japanese currency, unlike the stock market, quickly started gaining value again. On Friday, in Tokyo, the yen closed at 147.35 to the dollar, compared to Monday’s 150.65 yen to the dollar. Until the momentary decline after the Iraqi invasion of Kuwait, the yen had gained ground on the dollar because of investors’ expectations that the Federal Reserve Board would be forced to ease credit to cope with the slowdown in the American economy, said Takafumi Abe, director of the international treasury division of Mitsui Taiyo Kobe Bank.
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SAM JAMESON

Full text: [Los Angeles Times (pre-1997 Fulltext)] Aug 20, 1990

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Core Micrographics Business Spurs Better Earnings at Anacomp

Citing the strength of its core business, Anacomp Inc. reported strong earnings for its third quarter. Wall Street reacted with indifference, however, as the stock price hovers near its 52-week low of 2-1/2. Analysts, meanwhile, are taking a wait-and-see attitude as Anacomp management tries to rebuild credibility among investors. In the third fiscal quarter, which ended June 30, the company reported earnings of about $4.5 million, or 12 cents per share, on revenue of $164.9 million. The numbers are up slightly compared with the same period in 1989. During that time, Anacomp reported net income of $3.9 million, or 10 cents per share, on revenue of $158 million. (excerpt)
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Ketzenberger, John

Full text: [Indianapolis Business Journal] Aug 20, 1990

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Signs pointing to dividend cut

With its stock at a recent 28 1/2, Texas Pacific Land Trust’s 3.63 million shares have a market capitalization of about $103 million. Texas Pacific owns nearly 1.2 million acres of land in the desolate 400-mile stretch between Abilene and El Paso, Texas. In 1989, Texas Pacific earned $2.8 million on revenues of $5.4 million. Since 1980, Texas Pacific’s total annual return has been only 0.7%. What supports its stock price is a mystique rooted in an exaggerated faith in the appreciation of real estate and the resulting notion that Texas Pacific must contain assets far exceeding the current market capitalization. Even as a hedge against inflation, the stock looks overpriced. Texas Pacific has almost no contiguous parcels of land larger than a square mile. A valuation of the net realizable of Texas Pacific assets works out to be about $80 million, or $22.14 a share, 22% below the recent market price. Also, for the past 25 years, studies say West Texas land has appreciated at no more than inflation, and Texas Pacific long ago sold off its right to drill new oil and gas wells on its own land.
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WILLIAM DOYLE

Full text: [Houston Chronicle (pre-1997 Fulltext)] Aug 20, 1990

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Sagebrush Saga

With its stock at a recent 28 1/2, Texas Pacific Land Trust’s 3.63 million shares have a market capitalization of about $103 million. Texas Pacific owns nearly 1.2 million acres of land in the desolate 400-mile stretch between Abilene and El Paso, Texas. In 1989, Texas Pacific earned $2.8 million on revenues of $5.4 million. Since 1980, Texas Pacific’s total annual return has been only 0.7%. What supports its stock price is a mystique rooted in an exaggerated faith in the appreciation of real estate and the resulting notion that Texas Pacific must contain assets far exceeding the current market capitalization. Even as a hedge against inflation, the stock looks overpriced. Texas Pacific has almost no contiguous parcels of land larger than a square mile. A valuation of the net realizable of Texas Pacific assets works out to be about $80 million, or $22.14 a share, 22% below the recent market price. Also, for the past 25 years, studies say West Texas land has appreciated at no more than inflation, and Texas Pacific long ago sold off its right to drill new oil and gas wells on its own land.
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Barrett, William P.

Full text: [Forbes] Aug 20, 1990

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