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daily08-09-99's DAILY BULLETIN

August 10, 1999

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Market Data as of Close, 8/9/99:

o Dow Jones Industrial Average: 10,707.70 down 6.33, -0.06%

o Nasdaq Composite Index: 2,518.98 down 28.99, -1.14%

o S&P 500: 1,297.80 down 2.49, -0.19%

o TSC Internet: 480.03 down 18.36, -3.68%

o Russell 2000: 425.89 down 2.15, -0.50%

o 30-Year Treasury: 86 24/32 down 26/32, yield 6.225%

Companies in Today's Bulletin:

American Home Products (AHP:NYSE) (SALN:Nasdaq)

Gateway (GTW:NYSE)

In Today's Bulletin:

o Wrong! Tactics and Strategies: Cramer's Survival Tips
o Asia/Pacific: Japan Gears Up for Online Trading
o Evening Update: AHP Sees Strong Sales Growth; Lexmark to Join S&P 500
o Bond Focus: Bond Yields Riding High Upon a Deep Depression

Also on

Software: Corel Could Steal Some of the Linux Limelight

While many investors eagerly await Red Hat's IPO, others are eyeing Corel as a good buy.

Wrong! Dispatches from the Front: Heed the Advance-Decline Reading

When losers outpace gainers in the market, Cramer says don't bother. It's too hard to pick a winner in these conditions.

Silicon Babylon: Net IPOs, Step 1: Point Gun at Foot

New offerings flood to market in record-breaking numbers. For a forecast of the results, just dial 1-800-Flowers.

Moscow Journal: Puppet Show, Act 5: Yeltsin Fires Another Prime Minister

The appointment of Vladimir Putin raises the question of whether the Kremlin wants to postpone the coming elections.

Wrong! Tactics and Strategies: Cramer's Survival Tips


James J. Cramer

Don't lose sight of the goal: You want to stay in the game. There will be better times. Rates don't always go up. Stocks don't always come down. Here are some trading survival tips that I have used during the tougher periods:

1. Don't buy anything that you would not have the capital to buy more of if it went down 10% from here, or even more.

2. If you made a ton of money on margin and are in the process of giving it back, take the hit. Get off margin. The risks are too great.

3. Most stocks are going down. You are not alone in your misery. Don't press. There aren't enough winners to go around.

4. Wait for your pitch. The market will frequently look great and feel great and then give it up when the bonds roll over intraday. Don't buy into the up tape action, it is probably phony. Wait until things are down.

5. Be careful of unseasoned or new merchandise. You don't know who is trying to get out and who is working a piece. These situations should be regarded as if they were pond ice and it is 30 degrees out.

6. Don't chase anything. Sure, if you had bought



at the opening, you might have made a couple of points. But that was the only stock that worked. Everything else that was up a point or two at the opening gave it back.

7. Keep a journal of what is working and what is not, so next time when you are in a tough period you can remember what you did right and wrong.

8. Take walks, don't stare at your screen, don't overfocus. The investment bankers might not notice, but this is August and not much of consequence is happening.

9. Take smaller gains. If you have a single, take it, don't try to stretch it into a double. You will be thrown out.

10. Remember the good times. Keep your powder dry for those times. This is not one of them.


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

Asia/Pacific: Japan Gears Up for Online Trading


Kaya Laterman

Japan Correspondent

TOKYO -- If you're tired of hearing about lunatic online traders and the fortunes they win and lose, don't bother reading any further. Japan is jumping headfirst into the online trading froth.

Thirty-one online brokers have set up shop in Japan, and another 20 are planning to get up and running soon. Online accounts will likely double to 100,000 by October and surge to 600,000 by the end of next year, according to Shogo Noguchi, an analyst at the

Daiwa Institute of Research

, affiliated with the big brokerage of the same name. And that's sure to lure even more companies -- and more traders -- into the fray.

Compared to the estimated 5 million trading online in the U.S., Japan's embrace of Internet punting might seem reluctant. But with Japan's reluctant economy finally showing signs of life, online trading will grow at the speed of the country's


bullet trains, changing the way Japanese trade and how brokers do business.

"The first engine of the

online trading rocket has been ignited," says Yoshihiko Kan, manager of retail strategy at

Nomura Securities


, Japan's largest brokerage and the operator of the



Like American brokerages in 1995, Japanese online brokers are flourishing as the Internet phenomenon finally takes root in one of the world's most gadget-reliant societies. Sales of PCs have started picking up and Internet users, who total about 12% of the population, tripled this year.

That trend is intersecting with a stock market that's showing enthusiasm for rising for the first time since the collapse of the Bubble Economy in 1990. The


index, a broad benchmark similar to the

S&P 500

, is up 27.4%. The


index of smaller companies has doubled.

Also fueling the boom: Competition is helping bring costs down. When

DLJDirect SFG Securities

, the Japan joint venture of



, announced online commissions of 1,900 yen ($16.50) for small-lot trades, homegrown

Orix Securities

quickly countered with pricing of 1,800 yen. The changes take place in October, when the government fully deregulates commissions as part of its

Big Bang


Cheaper pricing is only one of the ways the advent of online trading has forced the big brokerages to reconsider the way they do business. In the past, asking a customer if they wanted Mickey Mouse or Snoopy on their ATM cards constituted good service. Now customers are looking for access to research and quick connect times, as well as bargain prices.

The older and larger brokerages have tried to sway customers by using their historical presence and name while also doling out their staff's reports and investment advice. The ability to trade online, over mobile phone or by fax through one account also spurs the cause.

Brokers are trying to tap men in their 30s and 40s, a demographic that is by and large salaried and looking to prepare for retirement, as well as have a little fun. Most of these keyboard jockeys have less than a year's trading experience, a situation that has already caused headaches for brokers who occasionally must explain the basics of securities trading.

"You would be surprised at some of the questions we get," says Nomura's Kan, adding that the naivete of some online traders is one of the reasons the firm stops accepting orders 30 minutes before the market closes.

That's one of the reasons average monthly transactions are still low, at about 700,000 yen per month. With those figures, brokers won't turn a profit on their operations for at least two to three years, says Daiwa's Noguchi.

Still, the rush is on. "There will be more users in Japan than in the U.S. over time," boasts Yoshihito Sato, director of

Matsui Securities

, a discount-brokerage maverick that was among the first of Japanese brokerages to start online trading. "The Japanese have money," he adds, alluding to the estimated $10 trillion in personal savings -- one-third of the world's total -- the country has sitting in bank accounts that yield as little as 0.1%.

That massive amount of wealth has helped prompt the


and Japanese Internet conglomerate


to announce the creation of a small-company stock market. When that gets under way, it will likely raise younger investors' eyebrows. With more stocks to choose from, more money will be raised to invest, encouraging more start-up firms to take a shot at going public.

The adoption of a 401(k)-like defined-contribution pension system, expected to come in the next year or so, is also seen fueling interest in online trading in Japan.

Expect the media blitz to continue.

Evening Update: AHP Sees Strong Sales Growth; Lexmark to Join S&P 500


Eileen Kinsella

Staff Reporter

American Home Products


, refusing to be pulled down by the weight of a recent $23.3 million jury verdict over its diet drug combination fen-phen, told


it expects its pharmaceuticals division to achieve earnings growth in the mid-teens percentage range over the next two and possibly three years.

Standard & Poor's




would replace



in the

S&P 500

after the close of trading Thursday. Raychem is being acquired by




In other S&P action,



will replace

TCA Cable TV


in the

S&P MidCap 400

on the same date. TCA Cable is being acquired by

Cox Communications



Premier Parks


will replace



in the S&P MidCap 400 on Friday. The Sbarro family is buying the Sbarro shares it doesn't already own.



will replace

American Bankers Insurance


in the

S&P SmallCap 600

on an unspecified date. American Bankers is being acquired by



In other postclose news (earnings estimates from

First Call

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

Earnings/revenue reports and previews

Gerber Childrenswear


reported second-quarter-earnings of 11 cents a share, below the five-analyst estimate of 17 cents, and down from 21 cents a year ago.

Hispanic Broadcasting


reported second-quarter earnings of 20 cents a share, better than the four-analyst estimate of 18 cents, and up from 16 cents a year ago.



said it expects its third-quarter earnings per share to come in 25 cents to 39 cents below the five-analyst estimate of 64 cents, due to lower sales in the latest quarter.

Offshore Logistics


reported first-quarter earnings of 15 cents a share, better than the seven-analyst estimate of 11 cents a share but lower than 29 cents a year ago.

Simon Property Group


reported second-quarter earnings of 71 cents a share, in line with the 14-analyst estimate and up from 66 cents a year ago.


reported a first-quarter loss of $10.10 a share compared with a year-ago loss of $3.75. The company said the latest quarter included a noncash preferred deemed dividend of $11.5 million. No per-share figures from operating income were provided. The single-analyst estimate was for a 61-cent loss per share.

Mergers, acquisitions and joint ventures

Dominion Resources



Consolidated Natural Gas


agreed to sell CNG's

Virginia Natural Gas

distribution subsidiary in exchange for support of the companies' proposed merger by the

Virginia State Corporation Commission


Offerings and stock actions



said it plans a 2-for-1 stock split of its common shares on Sept. 7, for shareholders of record Aug. 20.


(INTW:Nasdaq) 3-million share IPO was priced mid-range at $15 a share by lead underwriter

Invemed Associates



Earlier this summer, a group of independent oil producers known as

Save Domestic Oil

filed suit alleging that Saudi Arabia, Venezuela, Mexico and Iraq greased prices on crude oil sold in the U.S. The group complained that low prices had rusted independent firms out of business. But the U.S.

Commerce Department

rejected their case on the grounds that opposition from oil companies outweighed support for the case. Commerce said that without industry support, it couldn't ignite an investigation.

Michael Foods


said it hired

U.S. Bancorp Piper Jaffray


Merrill Lynch

to help it pursue strategic options including mergers, acquisitions, or the sale of the company.

Two funds led by financier George Soros sold 9.4 million shares of



a Latin American real estate company to

Peabody Global Real Estate Partners


and Peabody International Real Estate Partners

. Peabody funds are managed by

O'Connor Group


J.P. Morgan


Bond Focus: Bond Yields Riding High Upon a Deep Depression


David A. Gaffen

Staff Reporter

The weekend is most definitely over. Traders came in this morning and resumed the selling, taking bond yields to their highest levels of the year. The fire was stoked today by two types of torch-bearers -- those looking ahead at this week's quarterly Treasury refunding, and those looking back in anger at

Friday's surprisingly strong

employment report


"There's a shift in sentiment toward higher yields," said a drained-sounding Bill Hornbarger, fixed-income strategist at

A.G. Edwards

. "We've got the refunding this week and I think people are very nervous about the



Treasuries slowly eroded throughout the day, and the 30-year bond was lately trading at 86 25/32, down 1 1/32, but off the low of 86 23/32. The yield rose 6 basis points to 6.24%, the highest closing yield since Nov. 4, 1997.

The push toward higher yields reflects the market's assumption that the

Federal Open Market Committee

will hike the fed funds target rate from its current 5% at its next meeting, Aug. 24. But today's selloff is also typical of traders and investors preparing for the Treasury market's three-day quarterly refunding, which begins tomorrow with the sale of $15 billion in five-year notes. The five-year note fell 11/32, its yield hitting 6% for the first time since Oct. 22, 1997.

Typically, the market sells Treasury securities in anticipation of the auction in order to get the lowest possible price (and the highest yield). The five-year auction was sold with a coupon of 5.25%, so investors are going to get significantly more value than that note, which has been a consistent loser since May. Because the market tends to try to push yields up as much as possible, "you'd expect a bounce-back to follow," said

ABN Amro

market strategist Charles Reinhard.

Reinhard believes the market will bounce back after the refunding is completed because he thinks today's cheapening up of the notes indicates that "this is a good setup." During the third quarter the Treasury is

paying down $11 billion in debt, so the inflow of that cash could result in some buying during the next couple months.

Reinhard added that today's preparation comes "on the heels of some bearish reports, which makes it easier to extend the move."

Most specifically, Friday's July employment report and Thursday's

productivity and unit labor costs

figures. Nonfarm payrolls rose by 310,000, beating expectations by more than 100,000, and average hourly earnings rose 0.5%, compared with


consensus estimates for a 0.3% increase. And productivity only grew 1.3% in the second quarter, while labor costs rose by 3.6%.

Market watchers believe these inflationary reports give the Fed impetus to raise interest rates come month-end. Indeed, the September fed funds contract, traded on the

Chicago Board of Trade, is trading at 5.25%, putting at 100% the odds that the Fed will raise the funds target Aug. 24.

The bond market's ability to sustain a potential post-auction rally will be determined by economic data and speeches by Fed officials. Believing the August rate hike already accounted for, the market's new obsession is determining whether the Fed will raise rates at the succeeding FOMC meeting, Oct. 5.

The Treasury will sell $12 billion in 10-year notes Wednesday and $10 billion in 30-year bonds Thursday.


Jim Seymour will be chatting on Yahoo! on Tuesday, Aug. 10, at 5 p.m. EDT. Register for Yahoo! Chat at: It's free!

And the winner is ... Investment Challenge on ends August 20th! Who will be in New York with Jim Cramer for the opening bell?

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