Talking Deals; Ross’s Rich Pact At Time-Warner

Nevertheless, some compensation experts questioned the wisdom of basing bonuses on corporate earnings. ”As a general principle, if an executive is to be given a percentage of something, it ought to be of stock-price appreciation and dividends,” said Jude T. Rich, president of Sibson & Company, a New Jersey-based firm that specializes in compensation issues. Experts pointed out that Mr. [Steven J. Ross]‘s compensation would increase if he used the company’s stock to make acquisitions that added to pretax earnings, even if those acquisitions had the effect of diluting shareholder value. In another twist, Mr. Ross’s bonus is to be paid quarterly. ”That is atypical,” said Louis J. Brindisi, the senior partner of New York-based Strategic Compensation Associates. The bonuses of Time’s two most senior executives, J. Richard Munro and Nicholas J. Nicholas Jr., by contrast, are to be paid annually and are set at 125 percent of base salary. Mr. Ross’s contract is distinct in its stylistic as well as its financial approach. The document refers to Mr. Ross as ”the executive,” and contains a sentence whereby he ”acknowledges that the services to be performed under this agreement are of a special, unique, unusual, extraordinary and intellectual character.” Mr. Ross’s counterparts at Time, by contrast, refer to themselves in their contracts as ”the employee.” Their contracts, which run roughly 40 pages and are almost identical, address issues like trade secrets and the use of personal images to promote business.
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Bartlett, Sarah

Full text: [New York Times] May 25, 1989

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Stocks Rise Slightly as Dow Advances 5.86

”The market was caught in a narrow trading range throughout the day but a modest afternoon recovery helped lift the Dow,” said Brian Luedtke, chief technical analyst at Piper, Jaffray & Hopwwod Inc. in Minneapolis. ”Selected takeover stocks continued to be the focus of investor attention.” Technology and Energy Issues
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WIGGINS, PHILLIP H.

Full text: [New York Times] May 25, 1989

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Market Place; Behind Pessimism Over ‘Junk Bonds’

”The spreads haven’t been this wide since October 1987, when the stock market crashed,” said Peter Avelar, the manager of Paine Webber’s High-Yield Fund, adding that the spread then went to about five percentage points, a level seen only twice before in the relatively brief history of a large and active junk market. ”It just got ridiculous,” said Michael McNamara, director of fixed-income research for Kemper Financial Services, a money management firm. ”We’ve been heavy buyers of zeros.” Zero-coupon junk bonds are inherently more risky than other bonds, for two reasons. The obvious one is that in the case of a default brought on by a recession or business reversal, the owner of such a bond has nothing but a security of dubious value, while the owner of a coupon-paying bond has as least already received some interest payments. For junk bond buyers, the big questions remain when the next recession will come and how severe it will be. With so many more junk bonds outstanding, and many junk bond issuers also the owners of junk bonds issued by other companies, it is possible to imagine a high default rate if a downturn is severe. ”Should evidence of a recession accumulate, we’d expect to see spreads widen further,” said Mariel Clemenson, the high-yield research director at Donaldson. ”But at the present time, the market has a clearly positive tone.”
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Norris, Floyd

Full text: [New York Times] May 25, 1989

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Jacobs Rumor Sends Avon Up

Ada, Mich., withdrew a bid of $39 a share, or $2.1 billion, after Avon’s board rejected the offer. In a related development, Representative John D. Dingell, the Michigan Democrat who is the chairman of the House Committee on Energy and Commerce, sent a letter yesterday to the chairman of the Federal Trade Commission asking that the commission investigate possible antitrust violations by Mr. [Irwin L. Jacobs] and Amway in their Avon bid.
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Full text: [New York Times] May 25, 1989

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Company News; Prime Computer Jumps on Listing

The price of Prime Computer Inc.’s stock jumped $1 a share yesterday, to $16.375, after Wall Street sources said the company had been added to the restricted list of Oppenheimer & Company, suggesting that the investment banking firm might have found a buyer for the company.
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Reuters

Full text: [New York Times] May 25, 1989

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INVESTORS IN FOR SHOCK, WARN SKEPTICS OF RALLY

By some gauges that includes dividends as well as the level of stock prices, the market already has recouped all its 1987 losses and has reached new peaks, maintains Norman Fosback, editor of the investment advisory letter Market Logic in Fort Lauderdale, Fla. The rally has drawn support from a spreading belief that the Federal Reserve Board has found a way to steer the economy safely past the threat of rising inflation without causing any serious slump in production, consumption or investment. “In our view this all sounds like `deja voodoo’ – the best of all possible worlds. There is a recession out there somewhere in time and all the `new era’ or `new wave’ rhetoric won’t make it go away.”
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CHET CURRIER, AP

Full text: [Journal Record] May 25, 1989

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BB&T Carolina Bancorp Negotiate Merger Pact

BB&T Financial Corp. of Wilson has struck an agreement to acquire a High Point-based savings and loan even though it could be months, and possibly years, before it can complete the agreement. BB&T Chairman L. Vincent Lowe Jr. and Carolina Bancorp President J.D. Dobbins announced Wednesday their boards have approved an agreement under which 0.816 share of BB&T stock would be exchanged for each of the 1.7 million shares of Carolina Bancorp outstanding. This would give the transaction a value of about $27 million based on BB&T’s stock price of $19.62 1/2 this week. (excerpt)
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Scism, Jack

Full text: [Greensboro News Record] May 25, 1989

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STOCK MARKET BECKONS, BUT TAKE CARE

“You play the market at all times, there’s never a time you should be completely out,” adds Peter Raimondi 3d, managing director of The Colony Group in Boston. “Any (economic) extreme” like a recession “will offer an opportunity to make money.” Consider the automobile market. During a downturn, consumers are less likely to shell out thousands of dollars for a new car. However, drivers are likely to spend a lot on tires and auto parts to maintain their aging vehicles. One such company: Akron, Ohio-based Goodyear Tire & Rubber Co., which is trading at 54 1/2 a share. Still, some experts insist there’s a lot of steam left in the stock market. The Colony Group’s Raimondi is perky because corporate earnings are strong and the stock market, on average, is undervalued — the average ratio of stock prices and earnings is almost half of what it was a month before the crash, he says. Furthermore, corporations are in better shape to ride a downturn than they were in the 16-month recession that ended in 1982. One of [Brian Berghuis]‘ favorites is Rochester, N.Y.-based Paychex Inc., which provides payroll processing services to small businesses. Paychex is rapidly expanding but can quickly put on the brakes if a recession hits. he says. The stock is priced at 23. Raimondi takes a shine to recession-resistant stocks of the “sin companies,” which include liquor and tobacco producers. He also likes food companies stocks — people still eat during recessions — such as Minneapolis-based General Mills Inc., which is trading at 66 3/4 a share. Retailers of low-priced consumer goods are also a good bet. Melville Corp. of Harrison, N.Y., trading at 44 1/4, is one example: among its units are Thom McAn shoe stores and Marshalls, a big discount clothing chain.
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Hank Gilman, Globe Staff

Full text: [Boston Globe (pre-1997 Fulltext)] May 25, 1989

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With upbeat tune on Wall Street, some still singing the ’87 blues

By some gauges that include dividends as well as the level of stock prices, the market already has recouped all its 1987 losses and has reached new peaks, maintains Norman Fosback, editor of the investment advisory letter Market Logic in Fort Lauderdale, Fla. The rally has drawn support from a spreading belief that the Federal Reserve Board has found a way to steer the economy safely past the threat of rising inflation without causing any serious slump in production, consumption or investment. “The new wave is on a roll,” declares one of its most prominent proponents, Edward Yardeni at the investment firm of Prudential-Bache Securities. “Of course, inflation is still a problem. But there are many recent developments that should help to offset such business cycle pressures as high capacity utilization and low unemployment, which in the past pushed inflation higher.”
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Chet Currier

Full text: [Austin American Statesman] May 25, 1989

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Profitco Unit of Bankers Trust Emerges as Model for Operations

Bankers Trust New York Corp. was the first major financial to create an operations division structured as a profit center and called, appropriately, Profitco. Bankers Trust does not disclose Profitco’s contributions to the bottom line–although doing this would raise the company’s stock prices–but an analyst has estimated Profitco’s net income for 1988 at $112 million. Much of the unit’s profits are plowed into research, development, and global expansion. Bankers Trust denies that it is considering selling Profitco’s private banking area.
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Sudo, Philip T

Full text: [American Banker] May 25, 1989

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Tokyo Stocks Finish Firmer in Sluggish Trading; Shares Inch Up in London, Tumble in Hong Kong —- A Wall Street Journal News Roundup

Tokyo stocks closed firmer, helped by index-stock buying and purchases of recently weak shares by investors encouraged by the yen’s rebound. London share prices ended slightly higher, gaining little incentive from U.K. trade figures that were in line with market expectations. And panic selling resumed on the Hong Kong market, driven by concern that China’s turmoil will escalate. The Hang Seng Index tumbled 256.22 points, or 8.5%, for its second sharp fall this week. Volume on the first section was estimated at 700 million shares, up slightly from 665.8 million shares Wednesday. Gainers outnumbered losers 536-355, and 186 issues were unchanged. The Tokyo Stock Price Index of all issues listed in the first section, a 1.88-point gainer Wednesday, rose 9.77 points, or 0.39%, to 2519.50.
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Full text: [Wall Street Journal] May 26, 1989

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Stock Prices Advance Slightly, Raising Composite Index to Another 1989 High

Over-the-counter stocks rose, outshining bigger issues and pushing the Nasdaq Composite Index to another 1989 high. By comparison, the Dow Jones Industrial Average lost 0.05%. The Standard & Poor’s 500-stock index and the Big Board’s composite index both gained slightly. Many traders said the market appears to be strong enough to support further advances. “I don’t see any stocks running away, and I don’t see any panic selling,” said Lance Zipper, head of OTC trading at Kidder Peabody. When the stocks decline, he said, buyers come in, and the market resumes its gains.
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By Sonja Steptoe

Full text: [Wall Street Journal] May 26, 1989

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Persistent Rally: After Months of Doubt, Long Rise in Stocks Finally Gains Converts — Reassured by Economic Data, Investors Start to Worry More About Missing Out — Sam Donaldson Turns Bullish

With a few brief interruptions, however, stock prices have kept rising — more than 400 points, or almost 22%, as measured by the Dow Jones Industrial Average. But that has proved little comfort for most investors and market professionals. On the floor of the New York Stock Exchange, says Big Board governor Arthur Cashin Jr., the mood until recently has bordered “on the dismal and the hostile.” Because the rally has so often defied the news and the pundits, many people don’t understand it. With the memory of the crash still fresh, many others don’t trust it. And judging by the volume of shares changing hands, not to mention the teeth-gnashing and nail-biting that goes on each time the Dow mounts another climb, it’s clear that many people have just plain missed it. How far such momentum will take the market is anybody’s guess. Many analysts and money managers think stock prices this year could surpass the all-time high of 2722.22 the Dow set on Aug. 25, 1987. Some market averages already have hit records, including the Dow Jones Transportation Average, which is considered by technical analysts, those distinctly unsentimental types, to be a key indicator of the broader market’s strength. (The Dow Industrials closed off slightly yesterday at 2482.59.)
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Hong Kong market plunges: Fear of bloodshed shakes stock prices

“Hong Kong is famous for its over-reactions,” said Stephen Marcon of Peregrine Securities. “But people here are nervous. The Western world doesn’t seem to realize how susceptible Hong Kong is to the People’s Republic of China.” Turnover has surged all week, underlining how volatile the Hong Kong market is, brokers said. It came close to another post-October crash record high on Thursday, totalling $436 million US, just off Tuesday’s record of $471 million.
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Full text: [The Vancouver Sun] May 26, 1989

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Stock prices close mixed as market activity stalls

In New York, the Big Board had a mixed response to the newest data on the state of the U.S. economy as the Dow Jones average of 30 industrials slipped 1.28 to 2482.59. The leading losers on the Toronto exchange Thursday were bank shares. All of the five major domestic banks’s shares fell. The Royal was down 25 cents, Bank of Montreal fell 12 cents, Canadian Imperial Bank of Commerce dropped 75 cents, Bank of Nova Scotia lost 37 cents and Toronto-Dominion Bank, which reported earnings Thursday just slightly below what analysts had been expecting, was down $1.25.
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Full text: [The Gazette] May 26, 1989

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Stock market runs out of steam Series: Business Digest

NEW YORK – The stock market stalled Thursday in a mixed response to the newest data on the state of the economy. The Dow Jones average of 30 industrials slipped 1.28 to 2,482.59. Advancing issues outnumbered declines by about 4-to-3 in nationwide trading of New York Stock Exchange-listed stocks. Volume on the floor of the exchange came to 154.47-million shares, down from 178.60-million in the previous session. MIAMI – Carnival Cruise Lines Inc. will expand Majestic Airlines, rename it Carnival Airlines. Carnival has leased its second jet to allow it to fly 20,000 passengers a month to its Crystal Palace Resort & Casino in the Bahamas starting June 17. An $84.5-million remodeling and expansion of the resort to 1,500 rooms and 14 restaurants is scheduled for completion this fall. Carnival already runs charter service from Miami and Fort Lauderdale to Nassau, in the Bahamas and has applications pending to start scheduled service from eight cities to its resort. NEW YORK – Salomon Brothers Inc. and the Securities and Exchange Commission (SEC) have settled allegations that the brokerage violated laws governing short-selling during the 1987 market crash and failed to promptly provide its books for inspection. Without admitting or denying guilt, Salomon agreed to be censured and to establish procedures to prevent short-selling violations in the future. It will not pay a fine. The law says brokers cannot short-selling stock when the stock’s price already is falling.
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Full text: [St. Petersburg Times] May 26, 1989

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Salomon Is Censured For Short-Selling Stock

”I view both ends of this case as a warning to the securities industry that they comply with short-sales rules,” said Lawrence Iason, regional administrator of the agency’s New York office. ”They think they can violate these rules with impunity. That’s simply not the case.” The S.E.C. said that in the midst of a declining market Salomon executed short sales for its own account on 19 stocks traded on the New York Stock Exchange. The transactions involved about 300,000 shares with a market value of about $12.5 million. The agency did not identify the securities involved or the amount that Salomon profited. Robert Baker, a spokesman for Salomon, said the reported violations were ”highly technical” and that the firm had settled ”to avoid further complications with the S.E.C.” ”There was no suggestion by the S.E.C. that any Salomon trader intentionally engaged in any transaction contrary to the short-sale rule,” Mr. Baker said. ”On Oct. 19, Salomon had an aggregate long equity position and used its capital actively in providing liquidity to the market.”
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LABATON, STEPHEN

Full text: [New York Times] May 26, 1989

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Salomon Agrees to SEC Censure

Salomon Brothers Inc. and the Securities and Exchange Commission have ended a prolonged dispute over stock sales during the 1987 market crash and access to the firm’s records with Salomon agreeing to be censured. “This is intended to send a strong message to the securities industry that the Securities and Exchange Commission expects the securities laws and regulations to be obeyed,” Lawrence Iason, administrator of the New York regional office of the SEC, said after announcing the agreement yesterday. (excerpt)
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Henry, David

Full text: [Newsday] May 26, 1989

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Dow Slips 1.28; Market Mixed on Economy

Stock prices for May 25, 1989 are given.
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Full text: [Los Angeles Times] May 26, 1989

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Dow Slips 1.28; Market Mixed on Economy

A slightly weaker U.S. dollar against the Japanese yen on the foreign currency markets sent stocks prices higher in slow trading Thursday on the Tokyo Stock Exchange. The key Nikkei 225-share average closed up 153.57 points at 34,005.39. The weakened dollar brought some buyers back into the grain and soybean markets. Its strength had been believed to be holding down export sales of grain, analysts said, since a more expensive dollar makes U.S. commodities less attractive to foreign buyers. CHART: DOW JONES 30 INDUSTRIALS; CHART: MARKETS AT A GLANCE; CHART: NEW YORK VOLUME, Los Angeles Times
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Full text: [Los Angeles Times (pre-1997 Fulltext)] May 26, 1989

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