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daily07-05-99's DAILY BULLETIN

July 6, 1999


Market seesaws can't keep a good stock down. So Bernie Schaeffer recommends options on five tech leaders who beat forecasts. Get them with your FREE trial to The Option Advisor:

Market Data as of Close, 7/2/99:

o Dow Jones Industrial Average: 11,139.24, up 72.82, or 0.66%

o Nasdaq Composite Index: 2,741.02 up 34.84, 1.3%

o S&P 500: 1,391.22, up 10.26, or 0.7%

o TSC Internet: 664.32 up 24.17, 3.8%

o Russell 2000: 456.51, up 2.09, or 0.5%

o 30-Year Treasury: 89 24/32, up 8/32, yield 5.993%

Companies in Today's Bulletin:

Total Fina (TOT:NYSE ADR)

Elf Aquitaine (ELF:NYSE ADR)

TheStreet Recommends

General Nutrition Co. (GNCI:Nasdaq)

In Today's Bulletin:

o Editor's Letter: The Coming Week on TSC
o Wrong! Rear Echelon Revelations: Bring on the Grumps
o Market Update: Weekend Report: Japan's Tankan Meets Expectations; Elf Aquitaine, General Nutrition Get Takover Bids

Also on

Marc Chandler: Tankan Report Shows Japan's Recovery Is Not Yet Strong

The anxiously awaited report of business sentiment prompts the Bank of Japan to buy dollars.

Technician's Take: Are Half the Profits Better Than All of Them?

GBS examines whether it's wise to take profits earlier than planned.

Greed & Fear: Fed's Move Did No Harm to Asian Stock Markets, for Now

Plus, updates on Malaysia, China and Indonesia.

Jim Griffin: An Independence Day Stroll Down the Mall

Key Washington institutions -- the Fed, the Capitol and OMB -- aren't so far apart that officials can't talk to each other now and then.

Editor's Letter: The Coming Week on



Dave Kansas


It's scorching hot in New York. Sweat is dripping off the

New York Stock Exchange

as holiday revelers crawl through the canyons. Usually in times like these, the stock market settles in for a quiet summer with traders making early departures on Friday afternoons.

But with the

Federal Reserve

weighing in last week and a crucial earnings season upon us, few anticipate that the action will diminish. Instead, investors will be keeping a close eye out for problems such as the

warning from


(SBUX) - Get Starbucks Corporation Report

last week. In addition, investors will want to see how the Internet stock revolution is faring. Revenue measures will be watched closely in this group, and we'll be tracking it closely to see how the market responds.

This week we will venture abroad to bring you a report from one of the Internet's latest fronts. As Europe races to catch the Net fever prevalent in the U.S., Scotland is developing into a strong outpost for budding entrepreneurs. On Tuesday and Wednesday, UK Correspondent

Nick Watson

examines how information technology is transforming Scotland into Silicon Glen.

Also, this week we will begin profiling the weekly winner in our



investment challenge. It's all part of a competition that will find the ultimate winner participating in the opening of trading with columnist

James J. Cramer at

Cramer Berkowitz


So get ready for another exciting week on

. Any comments or questions, feel free to email me at and I'll be sure your issues are dealt with promptly.

L'Etoile du Nord

Dave Kansas


Wrong! Rear Echelon Revelations: Bring on the Grumps


James J. Cramer

Something probably has to go wrong here eventually. But I can't see it yet. I think the earnings parade, which begins this week, will offer mostly good news and we will go still higher.

Think about it. The reason why we had such a rocky June until the last week was because the economy is too strong. When the economy is too strong, you get all sorts of good earnings, even from the also-ran companies that typically don't do so well. When you have a super-strong economy, you get those small caps cooking -- the ones that seemed to do very little right at even 3% GDP growth do catch fire at four-plus percent, which is roughly where we really seem to be.

So now we get the good side of all of this strength, having wallowed through all of the bad side, which is higher rates, increased prime and a terrible bond market.

Of course, we haven't put to rest the bogeymen in that last paragraph, but he certainly won't be the focus, no matter how


tries to make it one!

(Which reminds me, don't forget the upcoming

Fox News Channel

gig for

, two weekends from now, which will be as raw and uncut as you get in business. And I hope if your cable operator doesn't get

Fox News Channel

, he is about to get a world of hurt from you. )

With the bond bogeyman on the sidelines, and earnings taking center stage, you can bet that sometime between now and the

U.S. Open

we are going to be wondering what all the fuss was about when bonds got back to 6%. Who cares? The economy hums just fine here.

In fact, what I think might shock people this go-around is that the market might not get trashed at 6.5%. If you had asked me that at 5%, I would have said no way, we are going to collapse. But this market's resilience won't even be tested 40 basis points from here.

Let me give you my thinking: Greenspan's

decision to switch bias said, basically, "We know all of you old paradigmers want us to throw some people out of work and make this economy be crummier than it is. But we made Congress a deal, you balance the budget and get a surplus going and we aren't going to act like the killjoys we have always been. We look around this great nation and we see that prosperity is the antidote to just about everything, from bad schools to crime. And we aren't going to insist on throwing this country back into the '70s and '80s when the government has stopped its massive inflationary spending."

Yep, the budget surplus, so ignored by everybody as a big yawner as we were worried about those 15,000 jobs that got created, or the 2,200 unemployment claims that didn't get filed, definitely played a role in the



You have to understand that this budget, a legacy of Bob Rubin, makes the Fed breathe easy. It also makes you think, why the heck aren't our interest rates much lower than those of the profligate European nations that couldn't hold a candle to our manufacturing capabilities or our financial prowess?

As I reflected on what has occurred during this beautiful but scorching Independence Day, I realized that very few of these bond market commentators, so scared of their shadow, even bothered to read the front page of the paper. Things just aren't as bad as they used to be.

But I don't want to lose the

David Joneses

of the world, no way. Just like I wish they would have

Jim Grant

on more, or maybe

Charles Allmon

again, or how about

Joe Granville

? Bring back more

Barton Biggs

; heck, he is a big name and he is always angry, and mean and negative. He gets the people panicking. Remember, that old doctor from


, the doom guy? I forget his name, but Man, he is always good for some selling and some rigorous gloom. He can clear a theatre of buyers faster than a bomb threat! Or, more importantly, when will

Dow Jones'



put on


already? Why can't we have a dose of Alan right at 9:30, say, instead of

Maria Bartiromo

, making us feel like idiots for getting long at


800 or 8000 for that matter? Why won't


cross-promote with


big gun?

We need some dancing bears to give us some lower prices, create some bargains, get merchandise artificially low and inspire worry and calamity. Without them, somehow I feel we will be forced to pay still higher prices if we want into this market.



James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund had no positions in any stocks mentioned. 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

Market Update: Weekend Report: Japan's Tankan Meets Expectations; Elf Aquitaine, General Nutrition Get Takover Bids


Elizabeth Roy

Senior Writer

While you were barbecuing (or, if you live in the Northeast, either cranking the AC or putting yourself on ice), overseas markets were whooping it up on takeover talk in Europe and an in-line


-- the

Bank of Japan's

quarterly survey of business expectations.

The tankan goosed Japan's stock market because fear had been running high that the report would be stronger than the average forecast, leading the Japanese government to abandon its policy of trying to revive the economy by keeping interest rates close to zero.

Released Monday morning in Tokyo, the tankan

found that while more businesses continue to rate business conditions unfavorable than favorable, the difference is narrowing. The report's headline number, the business conditions index for large manufacturing enterprises, improved to negative 37 for the June quarter from negative 47 for the March quarter. Economists surveyed by


had forecast an average reading of negative 36.

The last positive reading from that index came in September 1997.

"The tankan confirms that the Japanese economy clearly appears to be pulling out of the worst, coming, as it does, after the recent releases of relatively firm


figures for the January-March quarter," T. Nishizawa, an economist with

Nomura Securities

in London, wrote in a research note. Japan shocked the financial markets on

June 10 with the news that its economy had grown at a 1.9% rate during the first three months of the year. "The outlook once again confirms a scenario of corporate earnings recovering in the second half of the fiscal year through the effects of restructuring," Nishizawa added.

But, he said, zeroing in on the report's key market implication, "It appears unlikely that the

Bank of Japan will change its ultra-low interest-rate policy in reaction to these tankan results."

That view is widespread among Japan economists, and if it needed confirmation, the Bank of Japan provided some immediately after the release of the tankan by intervening in the currency markets to weaken the yen for the fifth time since the GDP release.

Traders who expected a better reading from the tankan thought the yen would rally against the dollar upon its release, so they were short dollars. When the dollar moved higher in response to the tankan, many were forced to buy back their dollars. The Bank of Japan aided the dollar's cause by buying $3 billion to $5 billion,


estimated. The intervention helped boost the dollar to 122.37 from 120.97 on Friday in what Nishizawa called "a sign that the authorities do not take an excessively optimistic view of the prospects for the economy." A weak yen promotes economic recovery by keeping Japanese products affordable in other markets.

The report helped drive Japan's

Nikkei 225

benchmark stock index to its first close over 18,000 since Sept. 25, 1997. The Nikkei rose 202.59, or 1.1%, to 18,135.06.

The other major Asian indices also enjoyed monster rallies to their best levels in over a year and a half. Hong Kong's

Hang Seng

tacked on 322.16, or 2.3%, to 14506.74, and South Korea's


added 29.42, or 3.2%, to 962.84.

There was euphoria in Europe, too, Monday, though it had more to do with merger activity, actual and rumored.

The actual big deal is a $43 billion unsolicited bid by French oil giant

Total Fina

(TOT) - Get Total SA Sponsored ADR Class B Report

for its smaller rival

Elf Aquitaine

(ELF) - Get e.l.f. Beauty, Inc. Report

. The deal, which would give Elf shareholders four Total Fina shares for every three, values the company at a 15% premium over Friday's close. Elf shares rose 21% in European trading.

Meanwhile, shares of Britain's

Cable & Wireless


rose on a

Sunday Times

story saying that

Deutsche Telekom

(DT) - Get Dynatrace, Inc. Report


France Telecom



Bell Atlantic



SBC Communications


"are all believed to have made informal approaches in recent months to sound out C&W about a deal."

Amid the chatter, all three major European indices rose by more than 1%. London's

FTSE 100

rose 100.10, or 1.5%, to 6,592.00. The French

CAC 40

added 77.17, or 1.7%, to 4697.84. And the German


tacked on 106.57, or 1.9%, to 5625.62.

In U.S. company news,

General Nutrition Co.


received a $1.7 billion cash bid from


, a Dutch foods group. The bid represents a 9.3% premium over Friday's closing price of 22 7/8.

In the papers...

This week's edition of


features a kindly view of



; a feature on

General Motors

(GM) - Get General Motors Company (GM) Report

making much of

Sanford Bernstein

auto analyst Gary Lapidus's opinion that the company could double its share price via a big share repurchase program funded by a spinoff of its interest in

Hughes Electronics


; and a piece that wonders, based on activity in the corporate bond market, whether



is eyeing

Paging Network




New York Times

Money & Business

section takes a long look at

America Online


. The company is aiming to double its current subscriber base of 17 million over the next five years or so, and to more than triple average daily usage to three hours a day, the


says. If the company succeeds, the paper says AOL CEO Steve Case "may be able to fulfill yet another ambition: for AOL to be the most valuable company in the world" by market cap. AOL is currently about a quarter the size of


(MSFT) - Get Microsoft Corporation (MSFT) Report

, the leader in market cap at about $470 billion.

Finally, if you didn't catch Monday's



Sun Microsystems

(SUNW) - Get Sunworks, Inc. Report

CEO Scott McNealy had this to say on the op-ed page: "At least Silicon Valley makes something. Wall Street brokers, lawyers and career politicians have what I call nonjobs. They don't make anything other than money. Brokers don't make the pie any bigger; they just take a piece for themselves."

Get in the trenches with James Cramer... Invest a cool $500,000 without the risk - register for TSC's Investment Challenge and play for prizes, including a trip to NYC and a morning with James Cramer! Pre-registration - June 21. Game begins - June 28.

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