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January 15, 2000

Market Data as of Close, 1/14/00:

o Dow Jones Industrial Average: 11,722.98 up 140.55, 1.21%; up 1.7% for the week

o Nasdaq Composite Index: 4,064.27 up 107.06, 2.71%; up 4.7% for the week

o S&P 500: 1,465.15 up 15.47, 1.07%; up 1.6% for the week

o TSC Internet: 1,108.24 up 10.29, 0.94%; up 2.2% for the week

o Russell 2000: 507.56 up 6.37, 1.27%; up 3.9% for the week

o 30-Year Treasury: 92 25/32 down 12/32, yield 6.688%

Companies in Today's Bulletin:


Pimco Advisors (PA:NYSE)

Mannesmann (MNNSY:Nasdaq ADR) (PCLN:Nasdaq)

In Today's Bulletin:

o The Coming Week: Accept It -- the Game Has Changed
o Smarter Money: Tech-Fund Closing Verifies the End
o Evening Update: Pimco Issues Fourth-Quarter Earnings Warning
o Bond Focus: Wealth Effect Assails Bonds

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For 50 years,


Jack Bogle

has been a hero to everyone tired of being ripped off by Wall Street. He's the father of the low-cost, no-load index mutual fund, and he's our very special guest for"Word on TheStreet" this week.


Peter Canelo


Morgan Stanley

joins us with his stock picks, and Gary B. Smith and Adam Lashinsky look to see if you can spot a takeover about to happen. And, as usual, predictions you can't afford to miss.

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Also on

Building Blocks: Looking for the Pop in REITs

Dividend increases carry a nice bonus, finds one REIT expert.

Retail: No Mess at Wal-Mart as Glass Breaks From Day-to-Day Duties

Next up for the retail giant: Confronting the Internet challenge.

Europe: The Anglo File: Mannesmann Replies Not With a Bang, but With a Whimper

A lame response to a hostile bid indicates that Vodaphone is winning the battle.

Internet: priceline Beaming Up as Investors Note Progress on Profit Front

Unlike another widely watched Net play, priceline is actually moving toward, not away from, the black.

The Coming Week: Accept It -- the Game Has Changed


Justin Lahart

Associate Editor

1/14/00 7:54 PM ET

You're a varsity soccer player and you're in gym class and today you're guessing that it won't suck as much as it usually does because you'll be playing soccer.

But you're wrong -- this game you love is no fun at all. Nobody knows positions, everybody clumps together and, worst of all, these idiots on your team won't pass to you. The way you play the game and the way they play the game are different. And it doesn't matter that your way reflects the history of centuries of play. Today, on this field, with these people, you're no damn good. Today, you lose.

The market: Join the discussion on


message boards.

This is the way the market feels for a lot of Wall Street veterans these days. Interest rates have gone up, and look like they'll continue to go up.



Alan Greenspan

has worried that stock prices might be driving the economy too high. And tech stocks are trading at multiples that assume, under traditional measures, long-term growth rates that are difficult to imagine -- at least for investors who cut their teeth trading things like


(PFE) - Get Free Report


General Motors

(GM) - Get Free Report

and such. In the past, things like this would have seemed like damn good reasons to take a defensive approach. But being defensive lately has meant watching others score goal after goal after goal. Guess what? Maybe you're the idiot.

"You have to accept the new world which you're in," said Gary Kaminsky, managing director of the asset management group at

Neuberger & Berman

. "Rising interest rates have not caused stock prices to not go up, so you have to be invested."

This does not mean Kaminsky thinks that's the way it's always going to be, or that interest rates, which historically have been relevant, won't ever be historically relevant again. It means that Kaminsky runs money and that his job is making money and that this is how he's making money now. If the rules change, he'll need to change.

Some people are guessing that the old rules will reassert themselves. "We're still fairly cautious at this time," said Lisa Cullen, strategist at

Merrill Lynch

. "The Fed is going to be pretty aggressive about trying to slow things down this year."

Now, Merrill has been so cautious for so long that one occasionally even runs into employees of the firm who joke about it being a great contrary indicator, but you can understand Cullen's point. The economy, in the Fed's judgment, is going too fast, and it's being driven by a consumer who's being cheered by big gains in stocks. It doesn't seem like a real stable situation.

But for the coming week, at least, that doesn't seem like the market's going to get too worked up worrying about how this all works itself out. Instead, the feeling is that the market got through a few important economic reports and a Greenspan speech pretty much unscathed, and now it's time for sweetness of earnings (or, in the dot-com world, revenue).

"People are expecting good earnings to come in, and they're not worried abut interest-rate fears," said Dan Mathisson, head stock trader at

D.E. Shaw Securities


It is the week that company results start pouring in.


(MSFT) - Get Free Report



(IBM) - Get Free Report




, General Motors and

Sun Microsystems

(SUNW) - Get Free Report

are among the bigs reporting, along with a whole slew of banks.

The focus will be on the companies that, in their results and their comments on business going forward, show the best potential for growth. Though others may be pretty good deals by traditional valuation methods, that's not what investors care about these days, according to Kaminsky.

"While the party is continuing, the party's been pretty selective," he said. "It kind of reminds me of the

Studio 54

days, where you had to be on the list to get in. You want to be in tech and you want to be in telecom. You want to be in high-growth stocks."

In the meantime, there's nothing like a velvet rope around the bond market.

"The path of least resistance continues to be lower bonds, higher yields and a 25-basis-point hike at the next Fed meeting followed by another 25 basis points in the spring," said Kevin Flanagan, money market economist at

Morgan Stanley Dean Witter

. "What we're dealing with is perhaps an overheating economy. There is some concern that inflation will gain a toehold."

Part of this of course goes back to stocks. When they rally, bond traders worry more about the potential for an even cheerier consumer, who continues to speed the economy along despite the Fed's efforts to the contrary.

"Until we see signs of slowing in the economy, the bonds will continue to struggle," said Flanagan. "Any rallies should not be chased."

Smarter Money: Tech-Fund Closing Verifies the End


James J. Cramer

1/14/00 3:58 PM ET

Say it ain't so -- my favorite fund is closing! Ever since my Dad turned me on to the


(JAGTX) - Get Free Report

Global Technology fund I have been recommending this one to everybody and his brother. It is the quintessential hot-hand fund and it has made many people wealthy.

Last year I said to beware if this fund were ever to close because when Janus


Twenty closed it marked an important short-term peak in the market. Already a bunch of you have emailed me and asked me if this is still a good tell for the market.

Join the discussion on


Message Boards.

I am not sure. Global Tech is what I would have called the New Tech 30, formerly the Red Hots. For those kinds of stock, it could mean a cessation in the rally.

But, in truth, that rally ended already. This is more of a verification of the end. Fitting, on a day when old tech rallies, that new tech has still one more version of


played for it -- until the fund opens again.

Random musings


Matt "Don't Sell Me Out" Jacobs

moaning here because we sold his


position while he was on the road. I am in GOTO Hell.


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. Cramer's fund may be long or short certain stocks in his B2B rotisserie league or New Tech 30 index. 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

Evening Update: Pimco Issues Fourth-Quarter Earnings Warning


Tara Murphy

Staff Reporter

1/14/00 8:02 PM ET

Pimco Advisors


warned investors that it could post fourth-quarter earnings as low as 33 cents a share, which would greatly miss the five-analyst

First Call/Thomson Financial

estimate of 44 cents a share. Pimco blamed the disappointing outlook on costs associated


acquisition of Pimco. Pimco said that also sees additional costs in the first quarter of 2000 as a result of the German-based insurer taking a majority interest in the investment management firm. Pimco also said that continued net outflows of managed assets at

Oppenheimer Capital

significantly cut Pimco's revenues and net earnings and expects softer performance fees at

Pacific Investment Management


In other postclose news (earnings estimates from First Call/Thomson Financial; earnings reported on a diluted basis unless otherwise specified):

Mergers, acquisitions and joint ventures

Lawyers for proposed merger partners

BP Amoco



Atlantic Richfield

(ARC) - Get Free Report

held talks with

Federal Trade Commission

staff to discuss a "litigation schedule," a company spokesman told


. Spokesman Tom Koch said that starting tomorrow, the FTC has 20 days to either sue or approve the merger plans. If the FTC opts to block the merger, five commissioners must favor filing a complaint claiming that the $27 billion merger infringes upon the U.S. antitrust laws. According to sources, the FTC is concerned that the deal would hike gasoline prices on the West Coast.

Earnings/revenue reports and previews

Papa John's

(PZZA) - Get Free Report

said its December same-store sales increased 1.7%.

Separately, the pizza chain said that it would assume a fourth-quarter charge as a result of a court's decision in legal conflict with


(YUM) - Get Free Report

Pizza Hut

unit. The litigation began in 1998 when Pizza Hut filed suit, alleging that Papa John's slogan used in TV and print ads was false advertising. In November, a court sided with Pizza Hut but also found some of its ads attacking Papa John's to be misleading. Papa John's said it sees pretax litigation compliance costs between $12 million to $15 million, with roughly $5 million, or 10 cents a share, being taken as a fourth-quarter charge.

Papa John's also said that it has made a motion to stay the court's injunction against slogan's use pending a possible appeal of the ruling. According to the company, if the stay is permitted, the litigation costs would be lower than expected.

Offerings and stock actions

Reader's Digest


said it set a share repurchasing program for up to 5 million shares.

(STOK) - Get Free Report

said it has axed cash tender offer to purchase all shares of

Kinnard Investments

for $8. A special committee of Kinnard's board of directors turned down the offer from and said that it would examine other strategic options. and its

SW Acquisitions

unit said it would take part in examining other alternatives for Kinnard. Last week, upped its initial offer for Kinnard to $8 from $7.50 a share.


The Pentagon said

Lockheed Martin

(LMT) - Get Free Report

has won a $1.34 billion contract from Israel to build 50 F-16D fighter jets.

Philip Morris

(MO) - Get Free Report

said it would raise its U.S. cigarette prices by 13 cents a pack.

For a look into this evening's after-hours trading action, please check out's

The Night Watch.

Bond Focus: Wealth Effect Assails Bonds


Elizabeth Roy

Senior Writer

1/14/00 4:42 PM ET

After an early rally triggered by a benign inflation report, the bond market went into retreat mode, spurred by evidence of extreme consumer confidence and big rallies in stocks, oil and commodities. Bonds ended the holiday-shortened day lower, but with yields still below their highest levels of the year, reached earlier this week.

After rising as much as 16/32 after the 8:30 a.m. EST release of the December

Consumer Price Index

, the benchmark 30-year Treasury bond finished the day down 15/32 at 92 23/32, lifting its yield 3.9 basis points to 6.693%. On Wednesday, the long bond closed at its highest yield in more than two years, 6.708%.

The market: Join the discussion on


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The CPI excited bond investors by rising slightly less than expected in the last month of last year, 0.2% overall and 0.1% at its core, which excludes volatile food and energy prices. Economists polled by


were looking for gains of 0.3% and 0.2% on average.

For the year, the CPI rose 2.7%, which was the fastest pace since 1996, when it rose 3.3%. But energy, which rose 13.4%, was largely responsible. The core CPI rose just 1.9% in 1999, the slowest pace since 1965, when it rose 1.5%.

But the rest of the economic news the day had to offer wasn't nearly so friendly, and the gains were short-lived.


industrial production

report, which measures anti-inflationary slack in the industrial sector of the economy in the form of the capacity utilization rate, found less of it than expected. The capacity utilization rate rose to 81.3%, two tenths higher than forecast and the highest since October 1998.

And a leading gauge of consumer attitudes, the

Consumer Sentiment Index

, hit a new all-time high of 111.5 in December (subject to revision at the end of the month). A high rate of consumer confidence, which was also detected earlier in the week by the weekly

Consumer Comfort Index

reaching an all-time high, irks bond investors, because it suggests the economy is unlikely to slow.

Add to that the potentially inflationary gains in oil (up $1.33 to $28.02 a barrel on indications that


will extend the production cuts it instituted last March) and the

Bridge Commodity Research Bureau Index

(up 1 to 208.1, the highest since October), and a stock market rally, which threatens to further lift consumer confidence and wealth, and it spelled doom for bonds.

While the decline was exacerbated by thin volume at the

Chicago Board of Trade

, where Treasury futures are traded,

Donaldson Lufkin & Jenrette

Treasury market strategist David Ging said the prospect that the


will ultimately have to rein in the economy by raising interest rates was the reason for the decline.

In his

speech to the

Economic Club of New York

last night, Fed Chairman

Alan Greenspan

"essentially said that as long as equities keep going up and the labor market remains tight, we're going to keep tightening, albeit gradually," Ging said. "So even with friendly inflation data, with the strong economy, the high confidence numbers, and the equity market going to new highs, we just can't find buyers."

There was also a strong technical aspect to the session, said Matt Frymier, a Treasury note trader at

Banc of America Securities

in San Francisco. Much of the buying of Treasuries this morning and

yesterday represented short-covering, and when it was over, there was nothing to stop prices from going lower, he said. "So it was back to the mode the market's been in for 13 months now."

In the end, it wasn't clear whether Greenspan's remarks had any direct effect on the bond market, except to slightly downgrade the likelihood that the Fed will hike the

fed funds rate

by any more than a single 25-basis-point increment at its next meeting on Feb. 1-2. The

fed funds futures

discounted a 22% chance of a 50-basis-point hike, down from 31% yesterday.

Traders read into this statement by Greenspan a certainty that the Fed will lift the fed funds rate from 5.5% to 5.75%, but probably not more: "Regrettably, we at the Federal Reserve do not have the luxury of awaiting a better set of insights into this process" -- the process by which new technologies appear to be raising the speed limit for economic growth.

But Greenspan's remarks certainly affected the bond market indirectly, through the stock market. "Through the so-called 'wealth effect,'" the Fed chairman said, huge gains in stock prices "have tended to foster increases in aggregate demand beyond the increases in supply. It is this imbalance between growth of supply and growth of demand that contains the potential seeds of rising inflationary and financial pressures that could undermine the current expansion."


Street Sightings

James Cramer will be appearing on "Fox News Sunday" on the Fox Network Sunday, Jan. 16 at 9 a.m. ET. Click here for local affiliates. Check local listings for times.

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