daily06-11-00 - TheStreet

TheStreet.com's DAILY BULLETIN

June 12, 2000


Market Data as of Close, 6/9/00:

o Dow Jones Industrial Average: 10,608.14 down 60.58, -0.57%

o Nasdaq Composite Index: 3,872.39 up 46.83, 1.22%

o S&P 500: 1,456.95 down 4.72, -0.32%

o TSC Internet: 948.95 up 22.48, 2.43%

o Russell 2000: 521.50 up 6.96, 1.35%

o 30-Year Treasury: 105 00/32 unchanged , yield 5.890%

In Today's Bulletin:

o Editor's Letter: The Coming Week on TSC
o The Coming Week: Optimistic but Wary Market Faces Major Data
o The Coming Week in Europe: Summer Doldrums Likely to Set In This Week
o The Coming Week in Asia: In Korea, North Meets South

Also on TheStreet.com:

Wrong! Rear Echelon Revelations: State of the New Web: 'Old World' Conquers the Web

The trader talks about who has emerged to dominate and influence the Web.


Mutual Funds: Your International Fund May Have the 'Arbs Welcome' Sign Out

Arbitragers are taking advantage of funds that are slow to fair-value, hence diluting assets.


Jim Griffin: Know When To Hold 'Em...

The timing is tricky, but the ultimate outcome is foreordained. The tape is fickle. Don't fight the Fed.


Silicon Babylon: Reporters Notebook: Talking Deals in Telluride

A view from the mountaintop on Microsoft, Netscape, CNet and the other deals that have come to define the Internet.


Editor's Letter: The Coming Week on



Dave Kansas


6/11/00 4:33 PM ET

Those of you who have been with us some time will know that a change is coming for


. We're close to embarking on a new strategy that includes making www.thestreet.com a free site and launching www.realmoney.com, a subscription site that will become the main home for the more than 100,000 current subscribers to www.thestreet.com.

While change is often unsettling, it's a necessary ingredient in making improvements. In making the coming changes to our site, we've sought to minimize discomfort by keeping a number of things as close to familiar as possible. For current subscribers, your old username and password will work with the new site.

On the


home page you'll be getting an upgraded set of features involving your favorite columnists, as well as a greater degree of interactivity, such as exclusive chats. And of course, as always, you'll continue to have access to all the breaking news, personal finance coverage and company analysis that's currently on



The price of a subscription to


, as we've said, will be $199.95 a year, up from our current prices. However, the good news is that current subscribers can extend their subscriptions for $99.95 a year if they renew before July 1. And readers now in their free trials who subscribe before the July 1 deadline will also get the lower $99.95 price. To take advantage of these offers, you can email

members@thestreet.com or call our Customer Service department at 1-800-562-9571.

Apart from the organizational and financial changes, we've made some design changes to make your reading experience easier. We strongly believe that if you can get to stories more easily, you'll be a happier reader.

Perhaps the most obvious change on


will be the removal of the creamy yellow background from our pages. While we are retaining much of the old look and feel, the yellow will be replaced by white. A global navigation, which will link to all of the sites currently in


network of sites, will reside at the top of the page just below our logo.


, of course, will be a new site with a new look and feel, but we've also tried to make it very familiar to you, our readers.

We are taking these steps with you in mind. As ever, we'll need your help and patience as we make sure that the transition goes as smoothly as possible. Although the Internet is a dynamic environment that almost requires change, we don't believe in change for change's sake. In the end, we want to make sure that you can get to the commentators, the news and the analysis that you've come to enjoy with the greatest amount of ease.

With change come surprises and concerns. I encourage you to contact our Customer Service group at

members@thestreet.com if you come across something that doesn't seem right. We'll get right on the case, making sure to fix any unforeseen problems as quickly as possible.

Finally, if you've got any additional concerns or suggestions, feel free to email me at

dkansas@thestreet.com. This is a busy and exciting time for us, but I'll still enthusiastically take the time to get your issues handled. We know you are the key to our success, and we won't ever let that slip our minds.

L'Etoile du Nord

Dave Kansas


Dave Kansas is editor-in-chief of TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at


The Coming Week: Optimistic but Wary Market Faces Major Data


Justin Lahart

Associate Editor

6/11/00 12:29 AM ET

For the stock market, things have gone from looking very bad to very good in a hurry.

It was just a few weeks ago that investors were bracing themselves for the worst. The economy had turned too hot, and inevitably the

Federal Open Market Committee would push through a series of rate hikes. This raised the prospect that, in their effort to slow the economy, the central bankers would slam on the brakes a little


hard. Not a pretty thought.

But over the past two weeks, there's been a string of reports suggesting the economy has slowed down.

New home sales

, the

Purchasing Managers Index

, the all-important

employment report

-- all came in softer than forecast. There's little doubt that if the FOMC met tomorrow, instead of June 27 and 28, it would leave rates on hold.

But then again, the



be meeting tomorrow, and there are reports out in the coming week which could shift the odds in the other direction. This is probably why the

fed funds futures, which have been an impressive tool for predicting future FOMC moves, indicate a 50% chance of a quarter-point hike -- even though only a handful of economists believe that will happen.

"It's premature to feel that the final policy verdict on the June meeting has been written," said Bill Sullivan, chief money-market economist at

Morgan Stanley Dean Witter


The crucial day will be Wednesday, when the May

Consumer Price Index -- the key U.S. inflation report, comes out.

"This is a critical series, not only for the market, but the policy makers as well," said Sullivan. "It will go a long way to shaping the ultimate probability of a rate hike."

Though clearly the most important, there are other big economic reports due. May retail sales comes out on Tuesday, the

Philadelphia Fed's

survey is on Thursday, and

housing starts

are set for release Friday. And along with the CPI on Wednesday, investors will get a gander at the

Beige Book, a summary of anecdotal information on the economy collected by the district Federal Reserve banks.


last Beige Book, which came out in early May, described an incredibly hot job market, but the latest employment report suggested things are starting to soften. "Is this sense of moderation in labor market activity reflected in the anecdotal evidence?" asks Sullivan. "It will be interesting to see if they provide any evidence of slack coming into the labor market."

Yet for all the worry that recent economic reports are somehow aberrant, suggesting a slowdown that hasn't really come yet, the odds that the economy is cooling certainly seem higher than they were last month. That's encouraging.

"We still need a little more to prove things are settling down," said

Salomon Smith Barney

equity strategist Jeff Warantz. But "we are feeling better having begun to see more economic numbers showing the Fed's rate hikes are having the desired effect.

"We've had a nice string of numbers," he continued. "I don't think the Fed's done yet, but it would appear we are closer to the end of the rate hikes. Obviously, that's a plus for the market."

The Coming Week in Europe: Summer Doldrums Likely to Set In This Week


Marc Young

German Correspondent

6/11/00 12:39 AM ET

BERLIN -- The stock exchange in Frankfurt may have recently extended its trading hours and slashed the number of public holidays on which it will close its doors, but the rest of Europe appears less ambitious.

Most European equity markets will remain closed Monday in observance of the Pentecost holiday, signaling that the Continent is already sliding into the summer doldrums.

Frankfurt, along with London, will bravely try to keep up appearances and soldier ahead in the coming week, but miniscule volumes and skeleton staffing are likely to hamper any real trading.

The anemic volumes could mean greater volatility for both individual stocks and broader sectors, as well as international mutual funds such as the


JP Morgan European Equity fund and the

(MAEFX) - Get Report

Merrill Lynch Euro A fund. "Things are going to be pretty thin next week," laments one trader in Frankfurt who got stuck working the holiday.

With many of his colleagues barbecuing and working on their tans (not only on Monday but for the entire week), the ever-flighty technology sector could see more wild swings than usual. Big blue-chip techs such as


(EPC) - Get Report



(SAP) - Get Report




will likely be more directly influenced by the whims of the


than normal.

That could be especially true for Siemens, because a company official, in a

Wall Street Journal

interview last week, reiterated the firm's desire to make acquisitions and expand its position in the U.S.

Other stock specific news could also cause issues to soar or tank amid the thin trade next week. For example, investors will likely keep an ear out for any rumors about the upcoming sale of 6.6% of the government's remaining stake in

Deutsche Telekom

(DT) - Get Report

. On Friday, reports surfaced that the offer of 200 million shares has already been oversubscribed.

German utilities






could get a boost Wednesday, when the

European Commission

is expected to bless their plans to merge.

Investors will also likely continue to digest comments from

Deutsche Bank


CEO Rolf Breuer. He may have scared some shareholders at Deutsche's annual general meeting Friday by saying the bank could become a hostile takeover target due to its low market capitalization.

Despite the torpid trading conditions expected next week, some investors think banks could really heat up later this summer. "Financial issues are poised to spring," says Robert Halver, equity strategist for

Delbrueck Asset Management

in Frankfurt. Their "performance is basically pegged to the movement of short-term interest rates." Halver thinks the

European Central Bank's

aggressive 50 basis-point hike last week means the tightening cycle could be over soon, which will help out financial stocks. Besides recommending Deutsche in the sector, Halver likes



and French insurer




A late-summer rally for financials, of course, won't help out bored traders in Frankfurt on Monday, but at least they can perhaps retain the hope that the next few months won't be as dead slow as the coming week.

The Coming Week in Asia: In Korea, North Meets South


Kaya Laterman

Japan Correspondent

6/11/00 12:34 AM ET

TOKYO -- When North Korean leader

Kim Jong Il

made a surprise visit to Beijing in late May, even Chinese officials were a bit bewildered.

Kim, who almost never travels abroad, praised China's recent market reforms and self-governed style of capitalism as he toured factories of computer manufacturers. The visit was not just a timely photo op for Kim, who will host a landmark summit between North and South Korea starting on Monday.

Once word of the China trip leaked out a little more than a week ago, Korea watchers began to speculate that Kim wanted advice on how to negotiate with the West, with which he has little experience. Or perhaps he asked for extra reassurance from China in the form of monetary aid. Then again, maybe he wanted to know how to sidestep making ill-fated comments about its weapons-of-mass destruction projects -- a major issue with the U.S. and Japan.

What investors in Seoul took away from the meeting was a different thing altogether: more profits for South Korean companies if its northern neighbor opens up to commerce and infrastructure projects.

The key


index climbed 10% over the past week, as investors scooped up shares of construction, energy and communication firms that could line up major deals. Although little is known about the country, most major aid organizations say the North needs new facilities for virtually everything, including electricity, because blackouts occur daily.

That said, international investors getting warm and fuzzy about making a quick


with Korean shares will need to take a deep breath before stepping in, experts say. Next week's summit is only the start of what likely will be a long and tangled web of negotiations to open up North Korea, which could mean the expected profits for South Korean firms will materialize five or more years later.

That's not to say you shouldn't buy any South Korean shares. Many Asia-Pacific funds have spiced up their performances by including shares of

Samsung Electronics



SK Telecom

(SKM) - Get Report


Korea Electric Power

(KEP) - Get Report


Pohang Iron & Steel

(PKX) - Get Report

, four of the most widely held Korean American depositary receipts by U.S. mutual funds, according to,

ADR.com, an ADR research site.

What investors may want to avoid, at least at this point, are funds that invest solely in Korean shares. Take, for example, the

(MAKOX) - Get Report

Matthews Korea Fund, which is down 9.5% over the past year and is one of the worst performers of all international mutual funds, according to fund tracker


. The fund owns some of the above-mentioned shares, but with the Kospi index sliding about 27% from the start of the year, having all eggs in one basket hurts.

Although Korea has made great strides in climbing out of the 1997 Asian financial crisis, it still has a long way to go. That's why it's been safer to invest in cross-regional Asian funds such as the


New Asia Growth Fund or

(ASIAX) - Get Report

AIM Asian Growth Fund, which are up 35.8% and 33.7% over the past year, respectively. Portfolio managers select only what they believe are the strongest performers in that region, and if a political or currency crisis occurs in one country, they can quickly cut their losses to invest elsewhere.

And right now, Korea is going through a painful but necessary reconstruction of its industrial conglomerates, known as


, as they teeter toward bankruptcy due to their large nonperforming loans. As a result, many local investors continue to avoid both the stock and bond market, preferring cash.

"I think the one-month period from now will be critical to the success of the government's restructuring efforts



. In the meantime, the market's upside is likely to be limited," says Terence Lim, director of research at

Merrill Lynch

in Seoul.

Nobody will argue against the fact that the summit is an excellent beginning for the two Koreas to iron out their deep-rooted issues. And even if South Korean President

Kim Dae-jung

goes home empty-handed, he'll have at least one victory. Local reports say North Korean officials already have given their thumbs up in forming a unified Korean team for the world table tennis championships next April.

John J. Edwards III on MarketTalk, hosted by Sage

Monday, June 12

Chat with John J. Edwards III on AOL's MarketTalk, hosted by Sage at 3:30 p.m. EDT. (Keyword: Live)

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