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daily08-22-99's DAILY BULLETIN

August 23, 1999


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Market Data as of Close, 8/20/99:

o Dow Jones Industrial Average: 11,100.61 up 136.77, 1.25%

o Nasdaq Composite Index: 2,648.33 up 26.90, 1.03%

o S&P 500: 1,336.61 up 13.45, 1.02%

o TSC Internet: 557.17 up 8.03, 1.46%

o Russell 2000: 434.38 up 1.61, 0.37%

o 30-Year Treasury: 10 128/32 up 19/32, yield 5.990%

In Today's Bulletin:

o Editor's Letter: Berko Is Boffo at the Email Box Office
o Market Update: Weekend Report: A Y2K Deadlines Tiptoes By; AOL Plans AOL-TV
o The Coming Week: Few Players in Attendance for FOMC Meeting Could Make For Volatility
o The Coming Week in Europe: The ECB Will Stand Pat as the Fed Moves

TheStreet Recommends

Also on

Wrong! Rear Echelon Revelations: Upon a Fed Tightening, JJC Will Be Ready to Spring

The trader is rooting for rate hike, and he predicts a market rally.

This Week in IPOs: Summer Vacation

After last week's hot IPO action, you'd think the i-bankers still would be driving product out the door. But you'd be wrong. Morgan Stanley Dean Witter Analyst Sees the Y2K Silver Lining

Plus, Intraware CEO's selling as part of the greenshoe.

Asia/Pacific: The Coming Week in Asia: For Japan, Biggest Bank Might Not Be the Best

But the euphoria over the announced alliance should linger in the coming week and maybe rub off on some other banks.

Commentary Features: Fear and Loathing in Interest-Rate Swaps

The world's supposedly safe but credit spreads keep widening.

Today's Polls: You Said It: A


Weekly Poll: What Will the Fed Do?

With all Wall Street eyes focused on Tuesday's FOMC meeting, tell us what'll happen and how the market will react.

Editor's Letter: Berko Is Boffo at the Email Box Office


Dave Kansas


8/22/99 2:48 PM ET

One of the best aspects of working on a Net publication is getting to hear from readers. During five years at

The Wall Street Journal

I received about five letters from readers. This weekend I've received more than 200 emails from a single story.

I, along with the rest of the staff at

, listen to what readers tell us. On Friday, I

asked readers special guest columnist

Jeff Berkowitz

. The response: overwhelming enthusiasm for more Berko. As many of you know, Berko is Cramer's partner and, as a few readers mentioned, the yin to Cramer's yang, or vice versa.

It's clear that you all enjoy reading the wisdom of money managers. Along with Cramer and Berkowitz, we have other investors writing for

, including

Jeffrey Bronchick


Gary B. Smith

. We have people with massive investment experience, such as

John Rubino


Helene Meisler

offering their insights. And we have experts such as

Jim Seymour

on technology,

James Padinha

on the economy and

Ben Holmes

on IPOs. It's a mixture of experience, expertise, intelligence and insight that you are not going to find anywhere else.

I encourage you to take a look at this all-star team of writers, and meantime we'll be out there hunting for more stars to fulfill your desire for top-notch information. If you've got suggestions, please don't hesitate to let me know at

This week, after Berkowitz' able work (and we're working on getting more of him!) we welcome

James J. Cramer

back from vacation. Knowing that he's tanned, rested and ready, we expect Cramer to come out firing from his trading turret Monday morning. Summer blahs? Not with Cramer back in action!

Finally, if there's any issue I can help you with or any question you have, please don't hesitate to email me. I'll make sure that your issues are addressed swiftly. Get ready for another good week on


L'Etoile du Nord

Dave Kansas


Market Update: Weekend Report: A Y2K Deadlines Tiptoes By; AOL Plans AOL-TV


David Rheingold

Special to

8/22/99 7:49 PM ET

Those dreading the time bomb known as the Year 2000 computer bug may find some solace in another digital deadline that passed with little fanfare this weekend.

No widespread disruptions were reported when the clock governing navigational satellites was reset to zero at 8 p.m. EDT Saturday,


reports. The satellites allow people to pinpoint their location through a network called the

Global Positioning System, or GPS. The GPS clocks started ticking on Jan. 6, 1980, with a digital odometer reading 0000, measuring the passage of each week.

In other weekend news,

Gordon Bethune

has a solution to the flight delays plaguing airports this summer: hand over the U.S. air traffic control system to the private sector.

Bethune, chairman of

Continental Airlines

(CAL) - Get Caleres, Inc. Report

, told


This Week

Sunday that federal budgeting is to blame for outdated air traffic equipment. U.S. airports have seen a 40% increase in flight delays from April to July this year,



Bruce Willis


Sylvestor Stallone


Arnold Schwarzenegger

are used to saving the planet on the silver screen, but now

Prince Alwaleed bin Talal

wants to succeed where they've failed: saving

Planet Hollywood


. The Saudi billionaire told


on Sunday that he had invested $10 million in an attempt to rescue the ailing franchise. The investment raises the prince's stake in the chain to 20% from 16%.

America Online


may soon appear on a different type of line: CEO

Steve Case

told Germany's


magazine Sunday that AOL is planning a television channel called


. The channel would feature email and chat-room services and would be transmitted via cable lines and not over the Internet.

Forget next year's Olympics in Sydney. Japan is poised to defeat France in a much bigger test of international might: who will be home to the world's largest bank.

Societe Generale

reaffirmed its opposition Sunday to a merger with

Banque Nationale de Paris

. French regulators will decide Tuesday what to make of BNP's recent three-way takeover bid, which won approval from

Banque Paribas

investors but not SG.


Dai-Ichi Kangyo


Industrial Bank of Japan


Fuji Bank

want to create a banking group whose assets would top $1.3 trillion.


Federal Reserve

will likely raise short-term interest rates when it meets Tuesday afternoon. A


poll found that 29 of 30 Wall Street bond dealers expect a quarter percentage point increase.

Versatility has outmuscled strength in


(T) - Get AT&T Inc. Report

new advertising campaign. The company has adopted "No Boundaries" as the slogan for its emerging line of sport utility vehicles, replacing the long-running "Built Ford Tough,"



Ford, meanwhile, has not decided yet whether to keep open its Bridgend plant in South Wales. The British government has offered a 30 million pounds ($48.5 million) incentive package, the U.K's

Sunday Business

newspaper reported. A Ford spokesman told


the company would probably make a decision this fall.

In the Papers

Internet companies may be blazing, but they don't float the

S&P 500's

boat. That's according to

David Blitzer

, head of the Standard & Poor's 500 Index committee at


. Blitzer tells


that the S&P generally admits companies whose "float," or percentage of stock belonging to the public, tops 50%.



(AMZN) - Get, Inc. Report



(EBAY) - Get eBay Inc. Report

don't make the grade;



comes closest, with a float of 54%.

Likely entrants to the S&P this year,

Merrill Lynch

equity derivatives strategist

Diane Garnick



, include








(XLNX) - Get Xilinx, Inc. Report


Level 3 Communications


. She also names

Telephone & Data Systems

(TDS) - Get Telephone and Data Systems, Inc. Report


First Tennessee National



Old Kent Financial



T. Rowe Price

(TROW) - Get T. Rowe Price Group Report



(SVM) - Get Silvercorp Metals Inc. Report

as possible candidates.


(BA) - Get Boeing Company Report

may team up with Chinese airlines to build its new 717 jet, the

Sunday Times

in London reports. Boeing wants to make the 717 the dominant plane among airlines in China, the



Meanwhile, the head of

Boullion Aviation Services

predicts a slump in commercial jetliner orders during the next two years. CEO

Robert Genise



the industry may get some help from Asia's improving economy. Boullion is a wholly owned subsidiary of

Deutsche Bank AG


Despite a fierce investor backlash,



could bounce back from its recent takeover of packaging distributor

Unisource Worldwide



reports. Georgia-Pacific, a forest and paper giant, saw its stock price plunge to $43 from $49 a day after it announced the buyout earlier this year. Georgia-Pacific CEO

Pete Correll



he expects to recoup his cost of capital by cutting $75 million in cost savings from Unisource the first year and saving another $75 million in 2000 as a result of synergy.


Peninsular & Oriental Steam Navigation

has rejected a seven billion pound ($11.3 billion) offer from


(CCL) - Get Carnival Corporation Report

, the world's largest cruise line operator, London's

Financial Mail

reported Sunday. Carnival was said to be mainly interested in P&O's cruise business,


, the newspaper said.


Edward Jones

plans to open offices in Ireland as part of an effort to expand into Europe,

The Sunday Tribune

in Dublin reports. No dates have been announced.

The New York Times

reported Saturday that

Carolina Power & Light

(CPL) - Get CPFL Energia S.A. Sponsored ADR Report

, North Carolina's second-largest utility, may soon buy

Florida Progress


for $5.3 billion. The newspaper, quoting unnamed sources, said a deal could be announced as early as Monday.

The Coming Week: Few Players in Attendance for FOMC Meeting Could Make For Volatility


Justin Lahart

Senior Writer

8/20/99 7:26 PM ET

If the


hikes interest rates, and everybody's at the beach, does it make a sound?

In the coming week, Wall Street will come awful close to answering that question (first posed, we think, by the

Bishop Berkeley

). A lot of trading desks will be empty when the

Federal Open Market Committee

meets on Tuesday.

"I've been talking to whatever clients I can find, and everybody is talking about how they'll be off to the Hamptons or off to Nantucket. I myself won't be here," said Jeffrey Applegate, chief strategist at

Lehman Brothers

. "There aren't going to be a lot of players."

Yet while a complete absence of players would bring silence, a relative lack could make for heck of a lot of noise. When volume thins, markets get volatile. Whichever way markets react to the Fed decision could be exaggerated.

This is not to say that people aren't pretty much of the same mind on what the FOMC is going to do. Just about every serious economist on the Street says the committee will hike the fed funds target rate by a quarter point to 5.25%. "Nothing is a foregone conclusion," says Don Fine, chief market analyst at

Chase Asset Management

, "but I'm hard pressed to come up with a reason they shouldn't go."

But on the margins, there may be some speculation that the Fed will not go, and this could make for a negative reaction. In the stock market, at least, a lot of play has been given to both a report said to have come out of advisory firm


(Johnson being former Fed Vice Chairman

Manuel Johnson

) giving a 25% chance of no hike, and an article by

The Washington Post's

John Berry on Friday suggesting a hike isn't entirely certain. Berry is thought to be close to Greenspan, but the article is clearly not sourced by anyone at the Fed.

Left to its own devices, then, the stock market might have a negative reaction to the announcement of a quarter-point hike. Fortunately for the equity market, stock traders will likely key their reactions to the Fed off the bond market. And the bond market carries no illusions that the Fed isn't going to go. Its recent move up has been more a matter of relief on the heels of the benign

Producer Price Index


Consumer Price Index

, which suggested that this may be the last tightening.

"What we have done is eliminated any allowance of tightening in excess of a quarter point," said Kevin Flanagan, money-market economist at

Morgan Stanley Dean Witter

. "The feeling now is that they don't need to be as aggressive as we thought earlier in the month."

This may mean that the bond and stock markets will be able to leg higher on the Fed meeting -- a repeat of what happened in June. It could set up the market for a bit of a rude awakening if the August

employment report

comes in strong. But that doesn't come out for a whole other week.

The other focus will be the dollar, the recent weakness of which has thrown a damper on the stock market. The worry is that the money that for two years flowed into the U.S. stock market while other economies suffered is beginning to ebb away.

Lehman's Applegate is not putting too much stock in the notion that good foreign stock markets will hurt the U.S.

"I hear that argument a lot," he said. "You know we tested that proposition and if you look at when U.S. demand for non-U.S. equity rises, you know what happens most of the time? U.S. stock market goes up." When people like stocks, they like stocks. Go figure.

The notion that the dollar's drop is a negative for U.S. stocks is also something of a stretch in this particular case, says

J.P. Morgan

chief U.S. economist Bruce Kasman. "I would argue most of the dynamic we've seen in the dollar is a good thing," he said. "It's a reflection of a recovery" from the economic crises of the last couple of years.

A weak dollar would be a problem if it weren't coming just from a recovery abroad, but from real problems with the U.S. In that case, there really might be the run for the exits some people have been worrying about. But if the U.S. economy were a mess, it would be a problem for stocks in any case.

"The dynamic of U.S. equity markets and U.S. assets is going to depend more on the fundamentals here," says Kasman. "The issue around capital flows is a second-order one."

The Coming Week in Europe: The ECB Will Stand Pat as the Fed Moves


Marc Young

German Correspondent

8/21/99 12:25 AM ET

There are few things worse than an envious central banker.

And next week U.S.

Federal Reserve


Alan Greenspan

will be the envy of monetary authorities the world over. Unlike the rest of the globe's central bankers, Greenspan and his cohorts are widely expected to earn their paychecks next Tuesday when they will likely raise interest rates by a quarter point to quash inflationary pressures.

While Greenspan will have the joy of pulling the rate-hike trigger, the only thing

European Central Bank


Wim Duisenberg

will likely do in the coming week is check out the tans on his sunburned colleagues during the ECB's first meeting after the summer holiday break.

Although no one expects the ECB to raise rates on Thursday and few observers see a move before the new year, Wim and his central banking friends can perhaps find solace in next week's data, which is expected to show the eurozone's economic recovery continues apace.

Sometime during the week, July

M3 money supply figures

for the 11 countries participating in monetary union will be released. M3 slowed in June to 5% in the year versus 5.3% in May, still way over the ECB's reference value of 4.5%. Although the figure is considered only a guide and not a hard target, if July's M3 comes in strong, Duisenberg and company will be given pause for thought.

Prior to the summer break, Europe's central bankers made clear they would be keeping a close eye on developments and should M3 and private credit growth continue to remain robust, the ECB's creeping tightening bias may become more than just talk. "The ECB is likely to be concerned if this continues," says Nigel Anderson, an economist for

Greenwich NatWest

in London.

Also on tap for sometime next week are German



import prices

for July. Both were affected by surging oil prices in the previous month, but the relative weakness of the euro may begin to show signs of putting upward pressure on import prices.

For the equity markets, banks and financial issues will likely remain of interest, particularly after the announcement that

Dai-chi Kangyo Bank

, the

Industrial Bank of Japan


Fuji Bank

are considering joining forces to make a Japanese giant and the world's largest bank.

That news gave rise to speculation European banks may be hurried along the path of greater consolidation. Although European banks have appeared reticent to engage in cross-border mergers, the situation may be slowly changing. Last week Dutch group


(ING) - Get ING Groep NV Report

bought the remaining stake it did not already own of German

BHF Bank


, and

ABN Amro

(AAN) - Get Aaron's Company Inc Report

Chairman Jan Kalff made offhand comments suggesting his institution might be interested in eventually taking over Italy's

Banca di Roma


If the Japanese manage to create a banking Godzilla, Europe's bankers may become more inclined to try pan-European mergers. Such manifestations of private-sector envy could end up putting the central bankers to shame.

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