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August 16, 1999


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Market Data as of Close, 8/13/99:

o Dow Jones Industrial Average: 10,973.65 up 184.26, 1.71%

o Nasdaq Composite Index: 2,637.81 up 88.32, 3.46%

o S&P 500: 1,327.68 up 29.52, 2.27%

o TSC Internet: 528.41 up 21.89, 4.32%

o Russell 2000: 434.05 up 5.23, 1.22%

o 30-Year Treasury: 10 011/32 up 17/32, yield 6.104%

Companies in Today's Bulletin:

Reynolds Metals (RLM:NYSE)

Alcoa's (AA:NYSE)

Varlen (VRLN:Nasdaq)

Berkshire Hathaway (BRK.A:NYSE)

In Today's Bulletin:

o Editor's Letter: The Coming Week on TSC
o Market Update: Weekend Report: Reynolds Spurns Alcoa's Offer; BNP Gets Control of Paribas but Not SocGen
o The Coming Week: Sudden Late-Summer Vehemence Worries Wall Street History Buffs
o Europe: The Coming Week in Europe: German Business Confidence Could Boost Euro

Also on

This Week in IPOs: The IPO Drumbeat Slows (Finally)

But buyers can still expect a good selection for at least the rest of the year.

Commentary Features: Principals in Cat Fight Over Internet Fund Record

Who deserves credit for the fund's 500%-plus rise? Depends on whom you ask.

The Cutting Room: The Cutting Room: The Guy From Olstein Financial Alert Wows Cramer

Also, green-room faves and the Taskmaster.


Technical Forum: Postcard From Pittsburgh: Just the Charts

Gary looks at Goldman Sachs, Smart Modular Technologies, USinternetworking and VeriSign in an abbreviated column.

Editor's Letter: The Coming Week on



Dave Kansas


8/15/99 5:42 PM ET

During the recent market turmoil -- before the rebound late last week -- I wandered by the desk of markets writer

Justin Lahart

to check on what was happening. Judging from emails and phone calls, a little panic had sifted into the humid summer air. But Justin seemed remarkably sanguine.

"What's happening? Trouble?"

"No," he said. "We may have a little bit more selling, but people are getting ready to get back in."

He went on to explain how fears of interest rates had gotten a little too intense. Chatter of a 0.50 percentage point move had started to surface, which seemed a little panicky. He indicated that people were looking for any good sign from the

retail sales

, out last Thursday, or the

Producer Price Index

, out on Friday. Both numbers soothed, and the market jumped higher.

Justin, along with the rest of the markets team, is at the epicenter of market intelligence. All day long they speak with traders, strategists and market mavens. They blend the viewpoints, check the facts and figures and give


readers the best markets coverage around. If you ever want to know what's happening, check out our

markets coverage to get the latest dope. We've got a team of reporters digging constantly, reporting on the latest swings in technology stocks, Net stocks, big stocks and small stocks. Also in that crew are a couple of ace bond reporters,

Beth Roy


David Gaffen

, both of whom keep a close eye on the world of interest rates.

While the markets crew helps you navigate the latest swings in the stock market, the work of

Herb Greenberg

continues to amaze


readers. Herb, through his relentless digging, continues to give investors vital information before it's too late. In a recent column,

James J. Cramer

said it best:

What's the opposite of hanging someone in effigy? Whatever it is, I want to do it for Herb Greenberg for his triple play of Stewart Enterprises (STEI) , Family Golfundefined and Sabratek undefined. Hit these stocks up. All three were red-flagged by Herb in timely fashion. Oh, that's too milquetoast. This guy has saved you a fortune. Again, when people ask me, "How can you charge for" I always say, "Read Herb and ask how we cannot charge."

For those curious about who is winning the TSC Investment Challenge, have a look at

the latest results. Competition wraps up on Aug. 20 with the winner getting to spend time at the trading turret with James J. Cramer.

Also, a chatting double-hit on



this week. On Tuesday, Chartman

Gary B. Smith

takes your queries at 5 p.m. EDT. On Thursday, our mutual funds dynamic duo

Dagen McDowell


Joe Bousquin

will take questions at 5 p.m. It's free, but you have to register at

So get ready for another exciting week on

. From our talented markets team to the hard work of Herb Greenberg, we'll be out there trying to find the most important stories for you. Any questions or comments, please feel free to email me at .

L'Etoile du Nord

Dave Kansas


Market Update: Weekend Report: Reynolds Spurns Alcoa's Offer; BNP Gets Control of Paribas but Not SocGen


David Rheingold

Special to

8/15/99 8:14 PM ET

The weekend brought a range of M&A news, from a failed bid in the aluminum industry to a split result overseas that will reshape the French banking industry.

Spurning $4.2 billion in cash and stock,

Reynolds Metals


announced Sunday that its board had rejected



offer to buy the company.

Two days after Alcoa, the world's largest aluminum company, made the unsolicited offer, privately held Chicago investment firm

Michigan Avenue Partners

announced its own buyout bid. The firm did not disclose the amount of its all-cash offer but said Friday that it was more than Alcoa's proposed deal of $65 a share in cash and stock.

Overseas, French banking group

Banque Nationale de Paris

vows to complete a three-way merger with

Banque Paribas


Societe Generale

, even though it failed to win over a majority of SG's investors Friday. France's

Council of Financial Markets

said Saturday that BNP won control of 65.1% of Paribas and 36.8% of SG after a six-month hostile takeover campaign. If combined, the three would make up the world's first bank with more than $1 trillion (931.4 billion) in assets.

Amsted Industries

expects to complete its takeover of



Monday. Amsted, which makes parts for trains, truck and cars, announced Sunday that it had secured 93% of Varlen's shares under a tender offer of $42 a share. Varlen's shareholders will not have to vote to ratify the deal.

Buffett's Profits Slide (Cue World's Smallest Violin)

One of America's favorite multibillionaires got his profit report out of the way after Friday's close. Citing weak performance from its insurance units,

Warren Buffett's

holding company

Berkshire Hathaway


reported a year-over-year decline in second-quarter profits. The company had net earnings of $376 a Class A share, down from $947 during the same period last year.

Mexico on Sunday posted a budget surplus of 7.866 billion pesos for the first half of its fiscal year, citing increases in industrial production and tax revenue. The Finance Ministry predicts a deficit of 1.25% of gross domestic product this year.


MCI WorldCom


was trying to finish repairs to its high-speed data networks Sunday. A software glitch has plagued the system for more than a week, stalling the

Chicago Board of Trade's

electronic trading and disrupting service to 12,000 customers that use the company's high-speed networks.



will slash about 550 jobs, or 8.6% of its North American workforce, in an attempt to boost flagging earnings. The company announced Saturday that it will close the southern plant in its hometown of Battle Creek, Mich. Kellogg has had to cope with cheaper store-brand cereals and Americans who prefer bagels and other quick snacks in the morning.

Contract talks at



enter their final phase Monday with the company's largest union threatening a strike if both sides do not agree upon a new contract by Sept. 1. Sticking points between the

International Association of Machinists & Aerospace Workers

and Boeing include pension funds, health care, work schedules and the use of subcontractors.

In the first unofficial test of GOP presidential contenders, Texas Gov.

George W. Bush

won the Iowa Republican straw poll Saturday. Bush collected 31.3% of the votes in the nine-way race. Following him were

Steve Forbes

with 20.8% and

Elizabeth Dole

with 14.4%. (Offer your own thoughts on some of the presidential hopefuls in this weekend's version of


weekly poll.)

The rally on Wall Street could continue another week, if Tuesday's

Consumer Price Index

inflation report is anything like last week's news. The counterpart

Producer Price Index

released Friday showed a small increase in wholesale inflation. Similar results for the CPI could quell fears of a continuing series of interest-rate hikes.

Wall Street enters the week awaiting earnings from technology giants






. (See



earnings calendar for more upcoming earnings.)


American Water Works


is riding a tide of consolidation within the U.S. water industry,


reports. The company, based in Voorhees, N.J., is eyeing 15 to 20 possible acquisitions, according to President and CEO James Barr. American Water Works also is entering the wastewater treatment business, according to




also reports that corporate America has done such a good job preparing for the Year 2000 computer bug that a New Jersey company helping them out hasn't been doing so well.

Computer Horizons


saw its second-quarter revenue from Y2K-related work drop 60%. The company, once valued at $1.6 billion, is now worth less than $400 million.

David Rheingold is a New York-based freelance journalist. At the time of publication, he had no positions in any of the securities mentioned, although holdings can change at any time.

The Coming Week: Sudden Late-Summer Vehemence Worries Wall Street History Buffs


Justin Lahart

Senior Writer

8/13/99 6:13 PM ET

For some people on Wall Street, the market's recent leg up seems like little more than a bout of temporary insanity.

Oh, sure: Broadly speaking, the rally makes sense. Investors had gotten worked up over the rate picture, with chatter emerging that the


would raise rates at its August meeting by a half-point, rather than the quarter-point everyone expects. Then there were the typical financial and economic worries. Some people fretted whether margin calls on Internet stocks would spill over into blue-chip techs; others were vexed by the apparent drift of capital from the U.S. toward recovering foreign economies.

It was a too-dour market, deeply oversold and needing only a little capitulative selling -- a little good news -- to turn it on a dime. The capitulation came Tuesday. A drop to precarious technical levels shook out weak holders and found buyers willing to make a stand. The good news came Friday when the

Producer Price Index

came in below expectations, allaying fears that the jump in crude prices and the drought in much of the U.S. would push the key inflation measure higher.

The worry, however, is that stocks are putting on a trading rally -- conforming, as they have all year, to the patterns of 1997 and 1998. People of this mind fear we're now riding the late-summer bounce that precedes an even more wrenching decline.

"I am definitely not a trader, but if I were a trader, I would be selling into this rally," said Doug Cliggott, equity strategist at

J.P. Morgan

. "Economic growth continues to surprise to the upside, bond yields are up and the Fed is in tightening mode. I think the risk level in the equity market is still very high."

There's certainly a case to be made for the market retesting its lows. While the market has fully priced in a 25-basis-point hike at the next Fed meeting, more signs of wage pressures in the next round of economic data could set investors worrying about an October hike. Continued recovery in overseas economies, particularly Japan, could renew pressure on the dollar -- movement in which lately has had a pretty strong correlation with stocks. And then October has been such a lousy month to be in stocks that some people will want to get the hell out of the market just for the sake of getting out.

But for now, these are back-burner concerns. Barring an unexpectedly strong

Consumer Price Index

on Tuesday -- the last key economic report between now and the Fed meeting -- this rally looks like it has the legs to carry it through the coming week and more.

"People are thinking of selling into the rally, but nobody is yet," said Sam Ginzburg, managing director of equity trading at


. "There are still a lot of stocks on everybody's list that they want to buy."

The Treasuries, too, are looking healthier than they have in weeks. "The PPI number was clearly good, the refunding is over, yields are still at very attractive levels -- we would expect the market to get better through the next few weeks," said Richard Gilhooly, senior bond market strategist at

Paribas Capital Markets


Indeed, Treasury yields may have hit their peaks, according to

Banc of America Securities

chief economist Mickey Levy. "Domestic demand growth is beginning to decline and money growth has been in a clearly decelerating path," he said. Because of those signs of economic cooling, Levy thinks the likely hike at the Aug. 24

Federal Open Market Committee

meeting will be the last.

But Cliggott worries that fresh gains in the stock market will heat consumer demand back up, raising the specter of a second rate hike.

"The goal at the end of the day is to slow demand, and I guess to do that, you have to make it hurt a little bit," he said. "That's how you do it. People don't smile and say, 'You know what? Let's not go to

Home Depot


.' They wring their hands and say, 'We can't go to Home Depot.' "

Europe: The Coming Week in Europe: German Business Confidence Could Boost Euro


Marc Young

German Correspondent

8/14/99 12:25 AM ET

While much of Europe will be at the beach making the difficult choice between sun block and cocoa butter next week, unlucky economists won't have time to get a tan.

With plenty of economic data out in the coming week, the closest economists will come to sunning themselves will be the halogen lamps in their offices. Among the important releases is Thursday's business confidence report for July from the Munich-based


economic institute.

That report will likely show the continent's largest economy, Germany, is hard at work, even if its vacationing population isn't. The report is also expected to show German companies feel better about themselves for the second month in a row.

In June, rebounding German business confidence helped the euro narrowly avoid parity with the U.S. dollar. It also convinced foreign exchange traders to give more credence to the stronger economic data from other parts of Europe that followed.

Since Germany accounts for about a third of the entire euro zone economy, robust figures for business sentiment would naturally set the stage for the euro to gain even more ground against the dollar. In Friday trade, the euro was worth $1.056.

Ironically, the euro's weakness, in part, helped boost German business confidence, as it made exporters' goods cheaper abroad. July's reading should show a continuation of that trend.

"June's surge was not a flash in the pan," says

PaineWebber International

senior economist Alison Cottrell. That isn't to say the reviving German economy will immediately cause alarm bells to ring at the

European Central Bank's

tower in Frankfurt. The ECB looks set to keep interest rates on hold until at least 2000, she says.

Other data expected in the coming week include figures for the French trade balance in June and Italian consumer prices for July, both to be released Thursday morning. The French trade surplus will likely widen to more than $1 billion and Italian prices should rise 0.3% vs. the previous month.

Stock traders also will have data to look at and that will direct them to financial stocks. On Monday,

Dresdner Bank


will release half-year earnings, as will Dutch giant

ABN Amro


on Thursday.

On Friday, German airline



will detail its results.

No sun block manufacturers are on the earnings schedule. They're probably at the beach.

John J. Edwards III on AOL's MarketTalk, hosted by Sage

Monday, August 16

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

Gary B. Smith on Yahoo!

Tuesday, August 17

Gary B. Smith will be chatting on Yahoo! 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?

Copyright 1999,