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daily02-28-00's DAILY BULLETIN

February 29, 2000

Market Data as of Close, 2/28/00:

o Dow Jones Industrial Average: 10,038.65 up 176.53, 1.79%

o Nasdaq Composite Index: 4,577.85 down 12.65, -0.28%

o S&P 500: 1,348.05 up 14.69, 1.10%

o TSC Internet: 1,154.55 down 21.56, -1.83%

o Russell 2000: 557.68 up 0.94, 0.17%

o 30-Year Treasury: 100 26/32 down 19/32, yield 6.189%

In Today's Bulletin:

o Wrong! Rear Echelon Revelations: Blame It on the Profit-Takers
o Banking: Weill's Alone at the Summit After Citigroup's Reed Yields
o Evening Update: Palm Boosts IPO Range; PWC Denies Journal Report
o Treasuries Retreat as Stocks Roar and Consumers Spend

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Wrong! Rear Echelon Revelations: Blame It on the Profit-Takers


James J. Cramer

2/28/00 4:34 PM ET

Here was a day that should have ended an hour ago.

Everything was being taken in both listed and over-the-counter issues, the tone was one of strength and even lowly worm

America Online


looked like it could be good for a couple of points.

But those dreaded gnomes, the profit-takers, came in and tarnished the day's luster. In fact, a bunch of stocks got creamed in the last half-hour, and the

Nasdaq 100

couldn't hold its measly gains.

For us, we got socked by



, which seems so cheap vs.



-- like that has mattered for the last 20 points. We used the weakness to get back into


(CNXT) - Get VanEck Vectors ChinaAMC SME-ChiNext ETF Report

, but that stock seemed unreceptive to new buyers.

And we're thankful for "Sevenex," which is our name for

724 Solutions


, a stock that seems to redefine the stratosphere on a daily basis.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund was long America Online, Conexant, Lycos and 724 Solutions. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

Banking: Weill's Alone at the Summit After Citigroup's Reed Yields


Peter Eavis

Senior Writer

2/28/00 7:21 PM ET

Sandy Weill's solo act is back. After 15 months in a sometimes strained power-sharing duo with fellow Chief Executive John Reed, Weill has the CEO job to himself after Reed said Monday he'll retire from


(C) - Get Citigroup Inc. Report

in April.

And although Weill's new billing is daunting -- chief executive of the world's largest and most powerful financial-services firm -- many observers are glad that the bank now has one boss, and that it's Weill, not Reed.

"Sandy's won again," says Tom Brown, a manager at

Second Curve Capital

, a bank-stock investment management firm that has no position in Citigroup shares. "And anytime Sandy wins, it's good for shareholders."

Quack Quack

Weill, in a carefully worded statement released Monday, says Citi aims to find a successor for him within two years, but stops short of saying when that successor will actually take over. "Like any strong leader, Sandy Weill recognizes the disadvantage of

anointing a successor early on and becoming a lame duck," says Second Curve's Brown.

Robert Rubin, the former Treasury secretary appointed co-chairman in October, again stressed Monday that he isn't interested in the CEO post.

Citi's stock rose on the news, adding 1 9/16, or 3.3%, to 49 9/16. Other bank stocks, hit hard in recent months, rose as well, as illustrated by the

KBW Bank Index's

3.2% ascent.

Citi shares continue to gain while bank mates sink

Source: BigCharts

Citi's board, populated with strong-minded executives like


(T) - Get AT&T Inc. Report

CEO Michael Armstrong, had been urging Weill and Reed to sort out the power-sharing and succession issues since the middle of last year. And the two did make a move toward doing that in July last year when, according to a memo leaked to

The Wall Street Journal

, they agreed that Weill would be in overall command of Citi's business lines, while Reed would have charge of technological innovations and legal issues.

Reed said that he and Weill discussed the leadership question four to five weeks ago, and the board approved Reed's retirement plans Sunday.

Unification Talks

On a conference call Monday, Reed stated that Citi was moving beyond the first stage of integration after the 1998 merger between




and moving into "a phase where the company would benefit from unified management." Rubin, also on the call, put it more clearly: "The time has come to have a single CEO."

Credit Suisse First Boston's

bank analyst Mike Mayo, a Citi skeptic, cautiously welcomed the news: "We think it's good to have more clear-cut management." (Mayo rates Citi a sell, and his firm has done no underwriting for Citigroup.)

So why are observers so blase about Reed's departure? After all, during his 35-year career he has been built up into something of a legend in the nation's banking industry. It can't be that he's getting past his prime: He's 61, while Weill turns 67 next month.

But Reed's achievements may have been overstated. Although he was instrumental in rebuilding Citicorp in the '90s, he also was partly responsible for the bank's near collapse at the start of that decade. In addition, the business areas that Reed was most closely associated with -- consumer banking and technological innovations -- are not highly rated by some observers. (

recently looked at

weaknesses in Citi's consumer banking areas.)

Says Second Curve's Brown: "The biggest disappointments of the '90s was Citicorp forfeiting its leadership in consumer banking." Brown says that Citicorp has slipped behind in its credit card business and that recent good results in its retail banking network have come mainly from cost-cutting, which generates only one-time gains. Consumer businesses at Citi accounted for 43% of core income in 1999.

Though he's often described as a visionary because of his ambitious plans to apply technology to banking, Reed's record on this front has been spotty. He was behind the costly acquisition of failed quotes system


, and Brown wonders whether e-Citi, Citigroup's current tech effort, will have its funding cut back now that Reed, its main backer, is going. e-Citi showed combined losses of $531 million in 1999 and 1998. "The question now is what's going to happen to

e-Citi chief Ed Horowitz," Brown adds. Horowitz wasn't made available for comment.

Holding the Red Umbrella

Now that the co-CEO arrangement is gone at the very top, some wonder whether it now will be eradicated in the next rank down, with Weill making sure that ex-Travelers people gain the advantage. CSFB's Mayo points out that the global corporate and investment bank, responsible for 51% of Citi's core income in 1999, still has one ex-Travelers co-head, Michael Carpenter, and one ex-Citicorp honcho, Victor Menezes. On the call, however, Weill said he "doesn't see any need to change that" arrangement. Neither Carpenter nor Menezes were available for comment.

Naturally, because Weill has delicately broached the subject of his own departure, the game of identifying possible successors soon will start in earnest. Weill has had a history of promoting from within, but none of the possible candidates seem as strong as Jamie Dimon, the young former head of the global corporate bank, once did. In a surprise move, Dimon, Weill's most trusted lieutenant, was asked to leave Citi in November 1998.

A senior exec like Bob Lipp, the head of the consumer business, normally would be in the running, but Mayo points out Lipp's over 60, and adds: "The place is not full of Young Turks."

That's why some people think that Weill may have to go outside for a successor. "They'll have to look externally as well as internally," says Scott Birnbaum, a vice president at

Mercer Management Consulting

, a consulting firm that has done work for Citigroup. While he thinks both Carpenter and Menezes could be runners, he also names

American Express

(AXP) - Get American Express Company Report

President Kenneth Chenault as a well-qualified candidate because he's one of the few executives with experience in running a large global financial enterprise. An Amex spokeswoman declined to comment.

Birnbaum adds that Citi's next leader also could be recruited from within the next institution it may decide to acquire.

Birnbaum also suggests that

Bill Clinton

would make a good successor to Weill. Relax, Citi shareholders. A spokesman for the president says he'll be "devoting a considerable amount of time to his library."

Evening Update: Palm Boosts IPO Range; PWC Denies




Tara Murphy

Staff Reporter

2/28/00 8:41 PM ET






raised the expected price range of its IPO to between $30 and $32 a share from between $14 and $16 a share. After the offering, its parent, 3Com will receive 532 million shares and will divest the shares within six months by handing them over to its stockholders.

America Online




(NOK) - Get Nokia Oyj Report




are set to buy the $225 million worth of the

Palm Pilot

maker's stock at its IPO price.

Goldman Sachs

is serving as the lead underwriter for the 23 million-share deal.


denied a report from

The Wall Street Journal

that said the reliability of its clients' financial reports had been scrutinized.

Today, the


reported that the

Securities and Exchange Commission

told 52 corporate clients of the firm that conflicts of interest which stem from personal investments of PricewaterhouseCoopers employees could influence their financial reports. According to the


, the SEC urged the clients to bring in different auditors to handle their year-2000 statements.

PricewaterhouseCoopers did say that the SEC requested that



retain a new auditor for fiscal 2000, but said it was still heading Compaq's fiscal 1999 audit. Earlier this year, a report from the SEC said roughly half of the firm's partners admitted to breaching rules that prohibit auditors from holding stock in companies they're reviewing.

In other postclose news (earnings estimates from

First Call/Thomson Financial

; earnings reported on a diluted basis unless otherwise specified):

Mergers, acquisitions and joint ventures

Fremont General


said it agreed to a deal with

Reliance Insurance


ending its interest in Reliance's workers' compensation reinsurance program.

Earnings/revenue reports

Crestline Capital


reported fourth-quarter earnings of 53 cents a share, beating the three-analyst estimate of 48 cents and up from the year-ago 34 cents.

First Tennessee


warned investors that it expects to post first-quarter earnings that are 9 cents to 12 cents below the year-ago report of 40 cents a share, missing the 13-analyst estimate of 41 cents. The company blamed market conditions and rising interest rates for the weak results and said that it has reduced its previously stated 1999 earnings to reflect an accounting change. The change cut fiscal 1999 earnings to $1.85 a share from $1.91. First Tennessee also said it expects the first-quarter earnings shortfall and market conditions to slice the estimated EPS growth rate for fiscal 2000 to roughly 8% to 10%.


(INTL) - Get INTL FCStone Inc. Report

posted fourth-quarter earnings of 29 cents a share, in line with the four-analyst estimate and up from the year-ago 24 cents.



posted fourth-quarter earnings of 41 cents a share, a penny better than the four-analyst estimate and up from the year-ago 36 cents.

Offerings and stock actions

Morgan Stanley Dean Witter

priced a 5.25 million-share IPO for

Avenue A


above its expected price range at $24 a share.

Brinker International

(EAT) - Get Brinker International, Inc. Report

added $100 million worth of stock to its current share-repurchasing program.


(CCL) - Get Carnival Corporation Report

set a $1 billion share-repurchasing program.

Chase H&Q


Deutsche Banc Alex. Brown

priced a 4.25 million-share IPO for



above its expected range at $18 a share.


General Electric

(GE) - Get General Electric Company Report

said the

Food and Drug Administration

gave approval to its

Innova 2000

cardiovascular system. Innova would give doctors a better look at arteries and blockages.

U.S. Energy Secretary Bill Richardson said he was moving forward in persuading big U.S. oil suppliers to boost their oil output to bring down oil prices and relieve beaten-down U.S. petroleum stocks. "There is a movement among many of the oil-producing countries that market volatility is too extensive, that financial stability is needed in the market," Richardson said during an interview on



For a look into this evening's after-hours trading action, please check out's

The Night Watch.

Bond Focus: Treasuries Retreat as Stocks Roar and Consumers Spend


Elizabeth Roy

Senior Writer

2/28/00 5:30 PM ET

The combination of a rebounding

Dow Jones Industrial Average

, stronger-than-expected economic news and a bearish indication from the interest-rate futures market depressed Treasury prices today.

On a day without any first-tier economic news, the focus was primarily on the Dow. And, like last week, the Dow's pain translated into gains for bond prices, as traders allowed themselves to hope that a struggling Dow portends an economic slowdown, today's Dow rebound pulled the rug out from under the Treasury market.

Meanwhile, the day's main economic release --

personal income and consumption

for January -- showed a bit more strength than expected.

Personal income rose 0.7% in January, in line with expectations, while personal consumption expenditures rose 0.5%, a tenth more than expected. However the December gain in personal consumption expenditures was revised to 1.1% from 0.8%. The 1.1% increase was the largest since a 1.1% increase in May 1998.

The combination of the December revision and the January consumption numbers point to a significantly faster pace of


growth in the first quarter of this year than economists were expecting. Personal consumption expenditures (PCE) account for about two-thirds of GDP and the 6.9% pace at which GDP is estimated to have grown during the fourth quarter was powered by a 5.9% increase in PCE. Henry Willmore, senior economist at

Barclays Capital

, said today's release suggests that PCE will grow at a pace in the neighborhood of 5.5%, up from a previous estimate of 4%. What economic slowdown?

(Separately, the

chain-type price index for personal consumption expenditures rose 0.2%. The year-on-year rate of increase for the index, the


new favorite for measuring inflation, held steady at 2.0%.)

At the same time, the latest biweekly

Commitments of Traders

report from the

Commodity Futures Trading Commission

, released Friday after the close, held some negative news. It showed that speculators in bond futures at the

Chicago Board of Trade

were net short just 1,044 contracts, down from 27,881 two weeks earlier and a record 71,094 two weeks before that.

That's negative because it points up the extent to which the improvement in Treasury prices over the last month represented short-covering, and how little short-covering remains to be done. Or, as

Miller Tabak

chief bond market strategist Tony Crescenzi put it: "If there's going to be a rally, it's not going to come from a short base because there is no short base."

The selloff hit the shortest-maturity issues hardest, in a reversal of last week's trend, when the shortest maturities outperformed. That makes sense,

Lehman Brothers

government bond strategist Doug Johnston said, because sometime during the next couple of weeks, the Treasury Department is likely to announce its first buyback of Treasury securities, focusing on the longest-maturity issues.

The benchmark 10-year Treasury note lately finished down 22/32 at 100 16/32, lifting its yield 9.4 basis points to 6.431%. The two-year note fell 6/32 to 99 31/32, lifting its yield 15.6 basis points to 6.517%. The 30-year bond lost 24/32 to 100 23/32, lifting its yield 4.3 basis points to 6.196%.

At the

Chicago Board of Trade

, the June

Treasury futures contract finished off 16/32 at 94 13/32.

Economic Indicators

Also today, the

APICS Business Outlook Index

rose to 53.5 in February from 48.3 in January.

This week's major economic releases are the

Chicago Purchasing Managers' Index

tomorrow, the

Purchasing Managers' Index

on Wednesday and the

employment report

on Friday.

Currency and Commodities

The dollar softened against the yen but whaled on the euro, as traders assigned a lower probability to an interest-rate hike by the

European Central Bank

. It lately was worth 109.35, down from 110.34 on Friday. The euro, which traded as low as $0.9400 earlier, lately was worth $0.9709, down from $0.9742 on Friday.

Crude oil for April delivery at the

New York Mercantile Exchange

fell to $30.17 a barrel from $30.35 on Friday.


Bridge Commodity Research Bureau Index

rose to 207.45 from 207.19 on Friday.

Gold for April delivery at the


fell to $294.2 an ounce from $294.60 on Friday.

Copyright 2000,