Publish date:

TheStreet.com's MIDDAY UPDATE

July 12, 1999



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Market Data as of 7/12/99, 1:00 PM ET:

o Dow Jones Industrial Average: 11,183.88 down 9.82, -0.09%

o Nasdaq Composite Index: 2,799.57 up 6.50, 0.23%

o S&P 500: 1,397.31 down 5.97, -0.43%

o TSC Internet: 666.07 up 1.23, 0.19%

o Russell 2000: 458.81 up 0.83, 0.18%

o 30-Year Treasury: 90 29/32 up 1 09/32, yield 5.898%

In Today's Bulletin:

o Midday Musings: Market Confounds Expectations With a Session of Struggle
o Herb on TheStreet: Why Waste Management Insider Selling May Have Been No Big Deal

Also on TheStreet.com:

Wrong! Dispatches from the Front: Street Slang Exposed

Cramer runs down what's really behind some of Wall Street's most cliched phrases.


Hardware & PCs: Gobi Takes Aim at Dell's Goliath

Total outsourcing is enabling small firms to threaten the PC giants with mere pebbles.


SiliconStreet.com: Will ICG Be the New CMGI?

The e-commerce venture capital fund is planning its IPO.


Online Brokers: For Online Brokers, It's Been a Long Road to Respect

After two years of laboring without much attention, cyberbrokers are finally getting coverage from white-shoe analysts.


Power Lines: Revisiting 10 Trendsetters

We check in on the 10 utilities we identified in December as the industry's leaders.


Dear Dagen: Dear Dagen: What's Got Janus So Wary of the Web?

The firm won't post publicly available info.


Midday Musings: Market Confounds Expectations With a Session of Struggle


Justin Lahart

Senior Writer

Stocks aren't supposed to be struggling today.

Japanese and European stocks markets put in good performances. Treasuries are cruising after the bond futures smashed through levels they haven't seen since mid-June. There's been a spate of merger activity -- atypical during earnings season. And then there's earnings season itself, which kicks off this week and which everyone says is going to be good.

So much for the market doing what it's supposed to do. At midday, the

Dow Jones Industrial Average

was down 29 to 11,165 while the

S&P 500

was off 6 to 1397 and

TheStreet.com Internet Sector

index was down 1 to 664. The tech-slathered

Nasdaq Composite Index

, though, was up 5 to 2798, and the small-cap

Russell 2000

was up 1 to 459.

Decliners were topping advancers 1,610 to 1,220 on the

New York Stock Exchange

with 372 million shares changing hands. There were 88 new 52-week highs against 36 new lows. In

Nasdaq Stock Market

action, advancers were beating decliners 1,894 to 1,752 on 549 million shares. There were 183 new highs and 23 new lows.

That stocks


mixed seems to give credence to an idea that's been making the rounds lately: that those good earnings that everyone expects have already been fully priced into the market. That may be true, according to

Everen Securities

chief investment strategist

Rao Chalasani

, but that doesn't mean that stocks don't have further to go.

"Not only are the second quarter's earnings exceeding expectations, a similar trend will go through for the third quarter," he said. In fact, industry analysts expect S&P 500 company earnings to gain 21.5% year-over-year in the third quarter against 11.2% in the second quarter, according to

First Call

. True, the second quarter may have been priced in, but the postearnings conference calls where companies gush about how good business looks going forward have not been.

"In addition, we have the long bond yield coming down," said Chalasani. "That should help the market go up further."

Chalasani's view meshes with that of Philip Roth, chief technical analyst at

Morgan Stanley Dean Witter

. Roth views today's weakness as the beginning of a consolidation that's "largely because of an overbought condition in the tech sector." He expects that will be worked off without too much downside, followed by a move into the cyclicals that will take the market higher still.

Yet both Chalasani and Roth worry that things could get sloppy later on this summer.

"The sheer overvaluation and the lack of money on the sidelines will cause problems for the stock market," said Chalasani, who thinks autumn may offer a better chance to put new money to work than now.

The stock market was supposed to be up today, but it's down.

General Motors

(GM) - Get Report

was supposed to be down on the late-Friday news that a California jury ordered it to pay $4.9 billion to six people severely burned when the fuel tank of their Chevy Malibu exploded after getting rear-ended. But it's up.

A slew of analysts came out to say that the verdict probably wouldn't stick. "We do not believe that publicity related to this verdict will have any lasting impact on GM's share price for a number of reasons," wrote

Merrill Lynch

analyst John Casesa in a report this morning. "First, similar verdicts against automakers have not had a prolonged impact on auto stocks in the past. Second, GM will appeal immediately and these cases usually take many years to resolve. Third, any final award is likely to be a fraction of the original damages and settled out of court."

GM was lately up 1 5/8 to 67 3/4.

Monday's Midday Watchlist

By Heather Moore
Staff Reporter



was down 4, or 7.8%, to 47 9/16 following news


(DIS) - Get Report

will combine its

Buena Vista Internet Group

with Infoseek and offer a tracking stock for the newly formed company, to be called


. Infoseek shareholders will receive 1.15 shares of go.com for each share held. Disney, which currently owns a 42% stake in Infoseek, will have about a 72% stake in go.com. The Mouse lately was trading up 1/4 to 27 7/8. (


wrote about

rumors of such plans from Disney last month.)



(INSP) - Get Report

was up 3/16 to 55 on word Infoseek will use the company's private-label white pages as the

Go Network's

directory service.

Mergers, acquisitions and joint ventures

Baxter International

(BAX) - Get Report

, a medical-products maker, was up 1 15/16 to 62 13/16 after saying it plans to spin off its cardiovascular business, creating a new publicly traded company with sales of nearly $1 billion.

J.P. Morgan

raised the stock to buy from market performer with a 12-month price target of 77.

Merrill Lynch

upped it to buy from accumulate.

Goldman Sachs

(GS) - Get Report

was up 1 11/8 to 68 3/8 on word it's buying Chicago-based market maker

Hull Group

for $531 million in stock, options and cash.


(IBM) - Get Report

was up 11/16 to 138 1/16 after announcing it would buy

Sequent Computer


for $810 million in cash. Sequent was down 3/16 to 17 1/4. Rumors of the takeout emerged in the options market in


Separately, online computer retailer

Cyberian Outpost


was up 1 3/16, or 12.2%, to 10 15/16 after saying it will sell IBM's full line of PCs.

Orion Capital

(OC) - Get Report

was up 6 9/16, or 16.1%, to 47 5/16 after Britain's

Royal & Sun Alliance Insurance Group

agreed to buy it for about $1.4 billion in cash.

Red Roof Inns


was up 4 3/16, or 22.9%, to 22 1/2 on news


, a French hotel group and owner of

Motel 6

, is acquiring the company for $1.1 billion, including debt.

Rogers Communications


was up 9/16 to 20 5/8 after


(MSFT) - Get Report

said it will invest $400 million in the company. Mister Softee was up 7/16 to 93 11/16.

St. Paul


was up 1 1/8 to 30 1/4 after agreeing to sell its personal insurance operations to

MetLife Auto & Home

, a subsidiary of

Metropolitan Life Insurance

, for about $600 million.


(SLB) - Get Report

was down 5/16 to 64 after announcing it will spin off its contract drilling business and combine it with

Transocean Offshore

(RIG) - Get Report

. Transocean Offshore was up 1/2 to 29 1/2. Schlumberger shareholders will have a majority stake in the resulting company, called

Transocean Sedco Forex

. The deal, which should close by year's end, is expected to be modestly dilutive to Transocean Offshore's 2000 earnings but accretive after that.

World Color Press


was up 4 3/4, or 15.9%, to 34 1/2 on word

Quebecor Printing


will take over the Greenwich, Conn., firm in a stock and cash deal valued at $2.7 billion, including debt. Quebecor Printing was down 1 to 22 11/16.

Earnings/revenue reports and previews


(AMTD) - Get Report

was down 3/4 to 37 7/16 after posting third-quarter earnings of 5 cents a share, beating the 11-analyst

First Call

estimate of 3 cents and moving up from the year-ago 3 cents.


(GCI) - Get Report

was up 9/16 to 72 after reporting second-quarter earnings of 87 cents a share, a penny above the 13-analyst consensus and up from last year's 78 cents.


(GBX) - Get Report

, a supplier of transportation equipment and services to the railroad industry in North America, was up 1/8 to 11 1/8 after reporting third-quarter earnings of 43 cents a share, in line with the six-analyst estimate and up from the year-ago 38 cents.

Analyst actions

CBT Group


was up 2 3/4, or 12.6%, to 24 5/8 after

Morgan Stanley Dean Witter

upgraded the stock to outperform from neutral with a price target of 30.

Eastman Kodak


was up 1 13/16 to 72 15/16 after

Warburg Dillon Read

raised it to buy from hold.



(PFE) - Get Report

was up 3/16 to 37 3/16 after the

Food and Drug Administration

approved the company's


drug. It will be the first topical drug sold to prevent heartworm disease in dogs and cats.

Herb on TheStreet: Why Waste Management Insider Selling May Have Been No Big Deal


Herb Greenberg

Senior Columnist

Monday Malaise:

Old news, no?:



may be too offline to follow


, but if they had been reading they would've seen that this column on Wednesday

mentioned fortuitous insider selling at

Waste Management


. That was two days before the



its entire newspaper with the very same story. (That's NEWS, and I hate to sit on NEWS, so we ran it in a midday column, which of course is why it pays to keep checking


throughout the business day.) The news in question was the sale of shares by insiders, including the company's prez, who dumped a big chunk of his holdings prior to the company's disclosure last week that its earnings would be far below expectations.

While on the subject: The point of


item and the


story was that it appeared Waste Management insiders might have been getting out while the getting was good. Waste Management stock plunged when the news was disclosed. But a spokeswoman, whom I couldn't reach Wednesday, told the


that this window was the first chance insiders had to sell since 1996. And I also received this comment from insider trading maven George Muzea, of

Muzea Insider Consulting


Please be careful when you imply that the insiders of a specific company knew that bad news was coming. If this was so, and if it could be proven, then insider-trading rules would have been violated and these insiders would have been subjected to severe penalties. I do not believe the selling insiders knew about the revenue shortfall. I believe they sold their option-related shares as part of ongoing selling plans that they consider management compensation. Most of the sellers, including the president, either increased or maintained ownership positions. Furthermore, if bad news was coming and they knew, then how do you explain the fact that Director Ralph Whitworth bought 686,000 shares in September 1998, increasing his holdings to 1,186,000 shares, and has not sold a share? Wouldn't it be logical for a director with this much stock to know if bad news was coming?

You would think. Thanks, George.

More IDT-idiocy:

The mail keeps pouring in, but one comment I keep getting is that investors in





subsidiary, such as




GE Capital



, certainly must've done


due diligence. So must have

Bankers Trust


CIBC World Markets


Lehman Commercial Paper

, which recently underwrote $150 mil in commercial paper for a bond buyback for IDT. So must have

Hambrecht & Quist


Deutsche Banc Alex. Brown


Bear Stearns

, which are the underwriters for the upcoming IPO.

To which I say: You would think. But think back to the IPO insanity of the mid-1990s, when bankers were so busy doing so many deals that due diligence (many of them will admit) was a joke. Go back and look at my

Media Vision

stories in the

SF Chronicle

. (Media Vision since went bankrupt, and its former CEO has been indicted for securities fraud.) This was one of the hottest deals (and subsequent stocks) of its day, but after the company blew up, it became clear that its investment bankers and even venture capitalists didn't do simple background checks on the CEO that would've kept any sane investor away from the company.

I am not saying history is repeating itself, but it's one of the lessons I carry with me and it's one reason I trust nobody. Nobody! Short-sellers and other sources often pass along snippets of this and snippets of that from public documents. I then go back, on my own, and review the whole document. Or ask for copies if they're not easily available.

Even good sources have been known to leave out, or overlook, pertinent details. I'm always amazed at how many of my very best sources fail to read the proxy, which is the first document I turn to because it shows how much the execs are paid (is it egregious?); who is on the board (is it the old boys network?); and what kind of related party transactions involving board members are disclosed (too close for comfort?). Sets the tone for the type of company you're dealing with.


Subodh Nijsure

wonders what process I go through when I do a story on a company like IDT. It varies from company to company, but in the case of IDT, after reviewing the documents, I simply called the company. I have public disclosures that raise questions, and it's the company's job to explain them. Simple as that.

Unbelievable how many IDT-iots accuse me of printing innuendo when, in fact, I was dealing with fact. And asking questions


investor should've been asking. Can't accuse


of not disclosing its loan to

Lermer Overseas Telecommunications

(which didn't technically exist) at a low 5%.


should be accused of not inquiring about it. One IDT-iot actually wondered how I knew the loan was 5%.

Because it was in the 10-K!

Oh, and why do I continue to waste precious space printing some of my emails: Because, from time to time it's important to show the character and cult of investors behind some of these stocks. Reader

Andrew Boord

put it best when, after reading some of my IDT-o-grams, he wrote: "Your job is like trying to cure those who don't believe they are sick."

Which leads to one other thing: Libel on message boards is a serious issue. My being a journalist doesn't give


a license to print lies about me,


or any other journalist. You should see some of 'em; They're doozies. And if you think JJC and I are in cahoots, go back and read


recent comments on the subject.

Fox fantasies:


Brenda B.


Gary B.

, me, JJC,




and a cast of not-quite-thousands from


debut (can you figure out the odd man out in that listing?) when "TheStreet.com" premieres on the

Fox News Channel

this Saturday at 10 a.m. EDT, with a repeat Sunday at 1 p.m. EDT. Rehearsals are going great. If your cable company doesn't get the

Fox News Channel

, start harassing them NOW!

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.

Get in the trenches with James Cramer... Invest a cool $500,000 without the risk - take TSC's Investment Challenge today and play for prizes, including a trip to NYC and a morning with James Cramer! Register through August 9. Game ends on August 20.


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