TheStreet.com's DAILY BULLETIN
July 26, 1999
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Market Data as of Close, 7/23/99:
o Dow Jones Industrial Average: 10,910.96 down 58.26, -0.53%
o Nasdaq Composite Index: 2,692.40 up 7.96, 0.30%
o S&P 500: 1,356.94 down 4.03, -0.30%
o TSC Internet: 591.85 down 1.90, -0.32%
o Russell 2000: 448.38 down 3.11, -0.69%
o 30-Year Treasury: 89 11/32 down 22/32, yield 6.004%
In Today's Bulletin:
o Editor's Letter: The Coming Week on TSC
o Market Update: Weekend Report: Telecoms Chime In With Big News; U.S. and Vietnam Agree on Commercial Ties
o The Coming Week: Next Week's Data Could Hold Clues About an August Fed Move
o Europe: The Coming Week in Europe: EU to Hold Balkan Reconstruction Talks
Also on TheStreet.com:
Jim Griffin: The Greenspan Groupie Problem
Everyone watches the Fed chairman like, well, a hawk. But the dollar/yen and dollar/euro markets tell us more.
This Week in IPOs: The Beat Goes On
An IPO market that refuses to slow down makes it seem like deals are just getting shoveled out the door.
Wrong! Take Two: Cramer's Rewrite of His 'Some Companies Answer the Call' Piece
The trader lifts the veil on the important world of conference calls.
Tax Forum: Does a European Daytrader Owe U.S. Taxes?
Also, we cover college savings plans, paper-free bond buying, a tax perk for seniors and more.
Options Forum: How to Buy Right When Writing Buy-Writes
Also, a postmortem on an aborted LEAPS strategy.
The Daily Question: Breaking Away: How Star Managers Fare on Their Own
Also, the case against micro-caps, why short-sale proceeds earn no interest and a defense of TIPS.
Editor's Letter: The Coming Week on
On Wall Street, it's all about managing expectations, especially during earnings season. That frenetic time of the year is well upon us, and
has been scrambling to get you all the numbers you need to know. Amid the flurry of reports, make sure to check out our daily coverage in the
markets section, which provides a comprehensive score card of who's meeting, and beating, the Street's estimates.
I hope you've been paying attention to our expanded international coverage. Led by International Editor
, our foreign staffers are trotting the globe to bring you the latest in investable ideas and news about overseas trends. Last week
discussed the bargains created by saber-rattling in
looked at corporate Britain's
growing embrace of the euro. This week, look for a feature by the peripatetic
on Malaysia's project to create the Cyberjaya smart city. As we build out our
international section, we're looking for your input. You can email Andrew at
email@example.com with your thoughts.
We've got a special series this week. Fund mergers happen every day, and we note them occasionally in stories. But as these mergers grew in numbers, we decided they were worth a closer look.
When Funds Collide
is a four-part series, beginning Monday, examining whether mergers are really the benign events that fund companies portray them to be. Staff reporter
finds that they're not. In fact, if you own a fund that is absorbing another, its performance will more than likely suffer in the future, according to Joe's story. And
adds that you could wind up paying extra taxes as well.
In other news, we've been paying close attention to IPOs in recent months as the IPO cycle continues to provide some spectacular debuts. One of the most promising, according to columnist
, will be the offering of
(RHAT:Nasdaq), a tiny software house with a handle on a very big idea -- Linux. In just a few years, Linux has come to dominate its niche by providing network server software, at the expense of no less an outfit than Microsoft. It makes for a fascinating tale, and Jim tells all in two installments beginning Monday.
Beyond the news, we've got a closely fought contest happening on the site:
TheStreet.com Investment Challenge
. Each week we profile the leaders, so you can read about which strategies are leading the pack. If you've missed it, it's not too late to register! Registration is open through Aug. 9, and you can play through Aug. 20. Visit the Investment Challenge, located on the
Community page, for details.
Finally, I hope you were able to catch the debut of our TV show, "TheStreet.com," on the
Fox News Channel
this weekend. We're just getting started in providing you the most energetic, on-target financial news show around. If you have ideas about what you'd like to see, check out the
TSC on Fox page on the site and email us using the form on the right side of the page. As always, we appreciate your feedback.
L'Etoile du Nord,
Market Update: Weekend Report: Telecoms Chime In With Big News; U.S. and Vietnam Agree on Commercial Ties
John J. Edwards III
There's some pretty big news jingle-jangling out of the phone sector this weekend, but none major enough to shake Wall Streeters out of their focus on Thursday's
Employment Cost Index
report and the continuation of
U.K. papers are reporting that
Cable & Wireless
may soon sell its
wireless phone business.
The Financial Mail on Sunday
said One2One, co-owned with
of the U.S., could fetch as much as 11 billion pounds, or $17.4 billion, in a sale to Germany's
The Sunday Times
of London separately reports that Cable & Wireless is on the verge of buying back its business phone operations, formerly called
, from 53%-owned
Cable & Wireless Communications
for about 7 billion pounds, or $11 billion.
Elsewhere in telecom, or telecoms, as our British Empire friends say, the Australian government said a further 16.6% of
, the huge, mostly government-controlled Aussie phone company, will hit the public market in October. The flotation of up to 2.132 billion shares is expected to raise about A$16 billion, or US$10 billion. The government, which sold 33% of Telstra in 1997, will hold about 51% after this latest offering.
is close to a stock-based merger of equals with
of the U.S. The resulting company would be worth about $1.5 billion.
In big global trade news, the U.S. and Vietnam inked an agreement in principle that moves the former combatants closer to full commercial ties. The pact came after a marathon negotiation that included a 17-hour session on Saturday, which left U.S. Trade Representative
stomach knotted from an ill-advised
combo ... sorry, that was me in college.
Elsewhere in the Eastern Hemisphere,
has made the sad, momentous decision to withdraw the Wonderbra from sale in Shanghai, according to the
. The bra enjoyed initial success upon its limited introduction to Shanghai in 1997, but sales were disappointing after department-store counters opened. "The Wonderbra has overestimated Chinese consumers' purchasing power," said the
. Further details on the bra's cognitive abilities were unavailable at virtual-press time.
In the Papers
fronts a piece on "How to Revive
." The story points out the Mouse House's multiple disorders, such as weak retail sales, weak
ratings and a weak hold on the attention of young fans bombarded by cooler entertainment alternatives (the last being the subject of an April
series). But it goes on to say Disney's parts are so appealing, despite recent struggles, that the sum of them will likely see its value rise in due course.
(this just in: He's bearish) talks with Tom Petrie of oil-and-gas investment shop
, who likes
The paper also includes a positive feature on
and a look at the competitive threat that electronic communications networks pose to the big stock exchanges.
The big business feature in Sunday's
New York Times
new Metreon "urban entertainment destination" (or mall, for those of you not in the PR business) in San Francisco. The mall-like whozamawhatzit, featuring shops, interactive games and movie theaters, is seen as part of the next wave in retail and entertainment, but its estimated $225 million cost has observers reserving judgment for now.
also takes a long look at the convoluted battle between
for control of
U S West
, focusing on Qwest CEO Joseph Nacchio. You may know the contretemps ended with Qwest agreeing to buy U S West and Global Crossing winning Frontier, but in this story you'll find out who called and emailed whom when and how often; what Nacchio's family gave him for his birthday; and much, much, much more.
The Coming Week: Next Week's Data Could Hold Clues About an August Fed Move
There is nothing quite so frustrating as when Wall Street seems bent on fulfilling prophecies. And damned if that isn't what it feels like these days.
Sure, it was nice on the way up, when stocks rallied up on the heels of the June
Federal Open Market Committee
meeting, breaking out of the range that had held them for three months. Just like the script said:
hikes; with rate worries taken care of, people turn to earnings, which will be good; market hits new highs.
The problem is that there was always a second part to the script, that the market would do that too-far-too-fast thing it's done the last couple of Julys, and that some kind of correction would follow. Everybody and his uncle knew that you were supposed to pile into the market on the Fed announcement, and everybody and his uncle knew that you were supposed to pile out of the market before
And so here we are, wondering if things will keep on following the script, if the market will have yet another big October selloff, at which point it will be time to get back in.
For Stanley Nabi, chief investment officer at
DLJ Investment Management
, the idea that stocks will sell off like they did in 1997 and 1998 is a bit excessive, but he will readily admit that they have further to fall. His reason is twofold. First, with the bulk of earnings out of the way, a positive has been removed from the market -- there will be no more bidding up stocks on hopes that next week's report will come in big. Second, on the back of Fed chairman Greenspan's testimony, the rate outlook has become much less favorable. Whereas a week ago people were saying that it was likely the Fed would not act at its Aug. 24 meeting, now they are much less sure.
"It's not a bear market or the beginning of a bear market," said Nabi. "I think the total magnitude of the correction will be in the 8% to 10% range -- no more than that. If the market goes down 10%, that would be enough of a correction to open up new purchases." Following that, said Nabi, "I think we'll make a new high by the end of the year."
The speed with which that happens will be highly dependent on what the Fed does. As far as Nabi is concerned, "The worst thing the Fed can do is not hike in August. If they don't get it out of the way, the questions will linger" and stocks could remain under pressure until the Federal Open Market Committee meets again in October.
The sense the Fed watchers got from Greenspan's testimony is that whether the FOMC does hike in August will be highly dependent on the economic data that come out between now and then.
"Greenspan made it pretty clear he wants to tighten," said David Ging, Treasury market strategist at
Donaldson Lufkin & Jenrette
. "He's just looking for an excuse. The market is going to be watching the data intently as it comes out for any sign that inflation is increasing or that the job market remains tight."
The economic focus in the coming week will be the second-quarter
Employment Cost Index
and, to a lesser degree,
gross domestic product
. Both reports "should be okay for the market" said Bill Dudley, director of U.S. economic research at
, but it is unlikely that the bonds will be able to make significant gains, since investors will be so worried about the next week's data.
"The market is going to have a little bit of trouble, because people are going to be very fearful of the data," said Dudley. "If the market rallies, it's not going to be a big rally."
Europe: The Coming Week in Europe: EU to Hold Balkan Reconstruction Talks
Pay for it now. Or you'll fork out twice as much later on.
Without doubt, that's what some of the
leaders will be thinking next Friday when they meet in Sarajevo to discuss investment and reconstruction in the Balkans following the Kosovo War.
The U.S. has already indicated that because it paid for the brunt of the Kosovo bombing campaign, the Europeans will have to shoulder responsibility for rebuilding and implementing a stability pact for the region.
If the leaders can come up with definitive sums of cash and hash out a significant reconstruction scheme for the Balkans, private investors are sure to follow closely behind. And while war-pounded Kosovo and its immediate neighbors, like Macedonia and Albania, will get a big chunk of the money, countries which are likely to serve as conduits for investment and reconstruction, such as Greece, Hungary and Bulgaria, also stand to benefit.
EU finance ministers have been cagey about naming figures, however, as most of them are engaged in cutting budgets and reigning in spending at home in order to meet their fiscal requirements for the euro.
The first clues the meeting will result in something substantive could come out of preparatory talks in Brussels on Wednesday.
officials, as well as representatives of other international bodies, will participate in those talks.
EU leaders, however, probably realize that the best way to keep the region from becoming a problem in the future is to make its inhabitants as fat and happy as everyone else in Western Europe is today. Greece remains their prime example. While the cradle of democracy may still seem a bit of a backwater compared to the rest of the EU, its membership and support from the West has helped cement the country as a shining example of market-oriented democracy when compared to its neighbors.
The Earnings Autobahn
Next week will also be an earnings jamboree for German carmakers, as
will hold a press conference for first-half results on either Monday or Tuesday and
will follow suit on Wednesday. The party will continue in New York on Thursday when
will release its first-half earnings. The euro's recent weakness against the dollar is expected to help boost the Stuttgart-based auto giant's results.
On the economic front, the
European Central Bank's Governing Council
will meet on Thursday to discuss monetary policy for the eurozone. The meeting will be the last before the ECB breaks its summer recess and should be a bit of a snoozer; no press conference has been scheduled.
Central banker reverie could be interrupted, however, when figures for June euro area M3 money supply growth. The figures are to be released during the coming week, although no time has been set.
Strong credit growth has fuelled money supply growth of late, but "large net outflows from nonbanks have tempered (the) M3 rise," says Nigel Anderson, an economist for
in London. However, the "ECB has signaled that it will be watching credit trends closely."
While the ECB is dissecting the intricacies of eurozone private credit growth, much of the Balkans will simultaneously be hoping the EU will expand their credit, as well.
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