TheStreet.com's DAILY BULLETIN
October 11, 1999
Market Data as of Close, 10/8/99:
o Dow Jones Industrial Average: 10,649.76 up 112.71, 1.07%
o Nasdaq Composite Index: 2,886.57 up 25.87, 0.90%
o S&P 500: 1,336.02 up 18.38, 1.39%
o TSC Internet: 732.79 up 9.57, 1.32%
o Russell 2000: 427.71 down 0.40, -0.09%
o 30-Year Treasury: 99 00/32 down 7/32, yield 6.189%
In Today's Bulletin:
o Editor's Letter: The Coming Week on TSC
o Market Update: Weekend Report: France Telecom May Buy Out Its Global One Partners
o The Coming Week: Fed-Obsessed Market Will Turn Its Gaze to Earnings
o The Coming Week in Europe: Ex-Finance Minister's Heart and Wallet to Meet at Frankfurt Book Fair
Also on TheStreet.com:
Wrong! Rear Echelon Revelations: State of the Web: Yahoo! Envy
they do it? JJC says the winning ingredient is a stellar management team.
Technical Forum: Giving It the Old College Try
Gary wants feedback on your alma mater. Also, charts of Cisco, CMGI, Microsoft and more.
This Week in IPOs: A Few Fundamentals, Part One
A refresher course on the basics of an IPO, plus this week's deals.
Easy Money: Easy Money: Brits Get Webby at First Tuesday
These Nethead gatherings on the Thames have blossomed into a meat market for British VCs and their suppliants.
Editor's Letter: The Coming Week on
10/10/99 6:28 PM ET
Weekends are a little different in the investing world. Markets, which used to be open on Saturday mornings, are dormant. Usually-intense weekday investors move at a different pace. And instead of acting on tidbits, the weekend is a time to ponder the previous week's events and recharge for
the coming week.
I know you've come to enjoy our weekday smorgasbord of columns, news and analysis. I encourage you to taste the weekend's mixture of information, entertainment and insight. The
TSC Weekender smartly wraps up what happened in the previous week with a witty summary of the three events that mattered most to the market. Moreover, weekend coverage includes clever takes on basic rules (why spell bank like banc?) and answers questions about
taxes and other items of interest.
Keeping with the educational theme, the weekend section includes a
James J. Cramer
rewrite of a particularly important column from the week before. The deeper explanation can help readers better understand the Wall Street lingo that Cramer favors when whipping off his diary-like items from his trading turret.
If you've got suggestions about how we can make our weekend coverage even better, please email
firstname.lastname@example.org. She'll be happy to hear from you!
The Y2K issue is creeping closer to D-Day. The topic has captured a lot of attention among investors, some betting that significant Y2K hype could produce some interesting trades. We're tackling the Y2K issue in a
series of stories that analyze not only the prospects of real Y2K problems, but also how investors should approach the Y2K issue. We'll have more in the weeks ahead as we tick down the remaining days before the calendar turns.
If you're curious about what's happening in the Internet investing space, David Readerman, the director of Internet strategy at
Thomas Weisel Partners
, is one of the best people to talk to. On Tuesday staff reporter
and Readerman will take your questions on a
chat. The chat starts at 5 p.m. EDT and it's free. You do need to
register before chatting, however.
Finally, if you've got any comments, questions or thoughts, please feel free to email me at
email@example.com. I'll make sure your issues are dealt with promptly!
L'Etoile du Nord
Market Update: Weekend Report: France Telecom May Buy Out Its Global One Partners
Special to TheStreet.com
10/10/99 7:50 PM ET
How do you cap a week during which the biggest-ever telecommunications merger was announced?
With the biggest telecommunications trade conference in the world. An estimated 200,000 people converged on Geneva, Switzerland, Saturday for
Amid the din of deals and expansions,
said it was willing to buy out its two partners in
, a U.S.-French-German telecommunications alliance that has been plagued by infighting. Fred Rucker, a member of Global One's executive board, told
he estimated the venture was worth well more than $10 billion.
The other two partners are Germany's
and the U.S.'
, the recipient of the record $115 billion bid from
Deutsche Telekom also plans to sell its 10% stake in Sprint.
has acquired a 15% stake in
, a privately held company in La Jolla, Calif., that makes smart phones. Siemens is aiming to triple its mobile phone sales by 2001. The purchase price was not disclosed.
wants to ease
traffic congestion in Europe -- online traffic, that is. The company said Sunday it is opening offices in Europe, where cable TV companies, Internet firms and telecommunications carriers are trying to meet a surging demand for the Internet.
is looking to increase its own access to European consumers. The company is eyeing the purchase of half a dozen telecommunications companies there, Walter Burmeister, president of the privately held
. FaciliCom is now merging with World Access.
, a U.S. network operator, said Sunday it will soon announce acquisitions in Europe or Asia. The company recently bought
is in talks to buy a 25% stake in Germany's digital television company
, the U.K.'s
newspaper reported Sunday. Murdoch's
is looking to expand its presence in Europe.
Real Time Synthesized Entertainment Technology
may soon make its debut on the
Frankfurt Stock Exchange
. The company is a subsidiary of Israel's
, which announced Sunday the hiring of two European underwriters for the deal.
, the British supermarket giant, is shopping for a partner. In the face of mounting competition, the company is looking for potential buyers in the U.S. and Europe, the
in London reported. Its rivals include
, the latter of which was earlier this year taken over by
United Auto Workers
reached a tentative agreement after a marathon contract negotiation session that lasted nearly 30 hours. Details were not disclosed, but sources told
the union agreed to let Ford spin off its
parts unit as long as the unit's workers are still considered Ford employees.
Think polo playing in an orchard.
, which makes
Fruit of the Loom
and other brands of apparel, said Sunday it was launching a $525 million bid to buy swimwear company
, whose brands include
Polo Ralph Lauren
In Canada, just over 94% of the
Canadian Auto Workers
three-year contract proposal, the union announced Sunday.
In the Papers
Deutsche Telekom is in talks with
, unnamed sources told German weekly newspaper
Welt am Sonntag
. The sources did not reveal the focus of the discussions. Speculation about some sort of Deutsche Telekom acquisition is rampant, especially with the money it stands to gain from selling its stakes in Global One and Sprint.
denied a report in the
that the airline was planning cutbacks. A company spokesman told
that, within the next year, Virgin Atlantic actually plans to add routes from London to Chicago, Cape Town, Las Vegas and Nigeria.
After selling the idea of a merger to the customers of banking giants
, CEO Richard Kovacevich is now trying to sell them on a myriad of financial services. He told
that cross-selling is the key to Wells Fargo's growth. The company is looking at buying small Midwest banks, but would not comment on speculation that targets may include
is trying to keep shareholders as other companies invade its turf. Exodus, which operates server farms, has seen its losses drop 41% this year, but CEO Ellen Hancock told
she predicts a turnaround within the next two years.
also features an interview with Anthony Weber, who manages the
Alleghany/Veredus Aggressive Growth Fund. His stock picks include
Optical Coating Lab
David Rheingold is a New York-based freelance writer. 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: Fed-Obsessed Market Will Turn Its Gaze to Earnings
10/8/99 8:04 PM ET
Earnings are coming, and they're going to be good. Big deal.
Join the discussion on
Yes, it's ugly to think the market won't at least momentarily take its eyes off of interest rates to gaze lovingly on third-quarter results. Consensus estimates call for
companies to add 19.3% to their numbers over last year, according to
First Call/Thomson Financial
, and it is likely that, as is usually the case, final results will be even better than that.
But with the
Federal Open Markets Committee's
move to a tightening bias at its meeting on Tuesday, the market still lacks clarity on what's going on with interest rates. Effectively, the bias tells the market that the Fed will weigh the coming economic data and then figure out if it should hike or not.
"The Fed's action will keep investors obsessed with every statistical wiggle that crawls across the tape," said Charles Crane, chief market strategist at
Key Asset Management
. "That means volatility, and whether the market recovers to post a new high or if it drops below 10,000 will depend on the tenor of economic statistics between now and the next Fed meeting."
Economists are pretty much on the fence when it comes to Fed. One camp says the odds favor tightening; the other says they favor standing pat. Friday's bizarro September
, with its unexpected drop in payrolls, did nothing to resolve things. Because it was so out of whack with estimates, there's a general sense that there will be a payback when the October numbers are reported next month.
"If, as many suspect, this number was subject to distortion, you could still get a very strong number next time around," said Marc Wanshel, financial economist and Fed watcher for
. Moreover, Wanshel notes that in the minutes to the Aug. 24 meeting, the FOMC said it was "concerned about the potential for increased cost pressures even if the labor market doesn't get any tighter."
Yes, the economists at J.P. Morgan think the Fed's going to tighten in November.
Not that the outlook from those who think we'll squeak by without a rate hike this is entirely sanguine.
"We're looking for pretty bearish economic numbers through the rest of the month," said Mike Cloherty, senior economist at
Credit Suisse First Boston
Inflation numbers don't look like they'll be all that good. The September
Producer Price Index
, coming out on Friday, should gain about 0.5% overall, 0.4% excluding food and energy prices, according to First Boston (both those numbers are 0.1% ahead of consensus). Oil prices stayed strong in the month, and
R.J. Reynolds Tobacco
boosted prices to distributors by 11%.
On the positive side, Cloherty said there should be some signs of moderating growth in the September
figures, coming out on Friday. The suggestion of a slowing may take enough of the sting out of strong inflation data this month to keep the Fed pat.
"In the end, we think the data isn't going to be strong enough to force the Fed to move in November," said Cloherty, "but it seems unlikely that we'll have enough data to have any confidence in that until the next employment report" at the beginning of next month.
But just because the market remains on Fed watch, and just because there remains a real possibility there's another hike coming, doesn't mean stocks have a heck of a lot of downside left in them. The economists at
Salomon Smith Barney
are some of the more hawkish ones on the Street, but the strategists at the firm doubt there's much stuffing left to knock out of equities.
"At this point, everything we look at tends to say that things are about as bad as they're going to get," said Solly equity strategist Jeffrey Warantz. "The Fed, they've done their damage. The market has pretty much priced in the expected rate increase."
Though he doesn't expect a shoot-em-up rally at the end of the year, Warantz does believe stocks will be higher when everyone's trying to remember the words to
Auld Lang Syne
. "Do I expect to see
12,000 by the end of the year? Absolutely not. Do I think it's possible that the Dow could end the year at 11,000? It's well within reason."
The bond market will be closed Monday for Columbus Day
Europe: The Coming Week in Europe: Ex-Finance Minister's Heart and Wallet to Meet at Frankfurt Book Fair
10/9/99 12:25 AM ET
Frankfurt Book Fair
is one of the largest trade fairs for the publishing world each year, but next week the event will play host to a settling of old political scores.
One of the over 6,800 book exhibitors from more than 100 different nations will be the former German Finance Minister and purveyor of old-school socialism
. Lafontaine will present his new book,
The Heart Beats on the Left
, on the fair's opening day Wednesday. By most accounts, the text of the book is a diatribe against his erstwhile colleague and current Chancellor
odious centrist leanings and deals with the period leading up to Lafontaine's resignation and retreat from public life last March.
Over the past few weeks, excerpts from Lafontaine's book have fairly stirred up the country's political scene. His criticisms of Schroeder's "new middle" policies and his condemnation of the government's austere budgetary proposals have brought him into open conflict with the leadership of his own center-left
Social Democratic Party
For Schroeder and the SPD, the timing of the book's release couldn't be worse. The party has just stumbled through a string of stinging defeats in regional elections as voters deserted in droves to the center-right
and the far-left
, the remade Communist party of East Germany. Schroeder has remained steadfast in his support of the unpopular spending cuts, but Lafontaine's attack has raised doubts over whether the SPD rank and file will continue to endorse the voter-losing measures.
Lafontaine's row with the leaders of the SPD has gotten so bad that there have been calls for him to tender his party membership. The PDS has said it would be happy to accept him as one of its own, but for the time being Lafontaine says he will stay in the SPD, although he now believes that a coalition with the PDS at the federal level should not be considered taboo.
Criticism of such an alliance has come from many quarters including
, who said he was ending his friendship with Lafontaine and it would be best if he "shut up" and "drank his wine," referring to the ex-finance minister's self-styled image as an epicure and gourmet.
For its part, the PDS is trying to capitalize on the fracas and is presenting itself as the only truly left-wing party in the country, hoping to make big gains in western Germany. The next chance to see how much damage Lafontaine has inflicted on his own party will be on Sunday during local elections in Berlin. The PDS has stepped up its campaigning in western sections of the city, hoping to lure away disgruntled SPD supporters, but the CDU is expected to retain control of the capital's legislature.
For the equity markets, telecommunications shares will likely be of interest in the coming week as the industry conference
kicks off Sunday in Geneva. The forum only takes place every four years, so companies are likely to take the opportunity to offer up some news in the hope of catching some headlines.
Investors will continue to digest the fallout from
$115 billion bid for
, which is part-owned by both
. Also in the news last week was France Telecom's announcement it would buy a stake in German mobile-phone carrier
and Deutsche Telekom's purchase of 35% of
On the economic front, Italy and the Netherlands will release figures for August industrial production, and Germany, France and Spain will publish figures for September consumer prices. Inflation is expected to creep up as global energy prices continue to rise.
"It's frequently argued that because inflation is still so low there is no need for the
European Central Bank
to tighten yet," says Catherine Lee, an economist for
, a unit of
, in London. But "the bottom line is that even if the ECB may not expect a take-off in inflation ... the case for keeping a very expansionary
monetary stance is now practically nonexistent."
Lafontaine, always an avid supporter of loose monetary policy, may have something to say about that at the book fair, although he may be busy with cynics lambasting him for the large sums of cash he stands to reap from his vitriolic tome. Belittling his book's title, his critics have become fond of jibing, "The heart may beat on the left, but the wallet definitely sits on the right."
John J. Edwards III on MarketTalk
Monday, October 11
Chat with John J. Edwards III on AOL's MarketTalk at 3:30 p.m. EDT.
MarketTalk is hosted by Sage Online. (Keyword: PF Live)
Vern Hayden on CNBC
Tuesday, October 12
Vern Hayden will be on CNBC's Power Lunch starting at noon.
Spencer Ante and David Readerman
Tuesday, October 12
Join Spencer Ante and Thomas Weisel Partners director of Internet strategy David Readerman for a chat on the Internet sector at 5 p.m. EDT on Yahoo!
Chat at: chat.yahoo.com. It's free!
Copyright 1999, TheStreet.com