July 15, 1999


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Market Data as of 7/15/99, 1:02 PM ET:

o Dow Jones Industrial Average: 11,181.03 up 32.93, 0.30%

o Nasdaq Composite Index: 2,829.96 up 11.83, 0.42%

o S&P 500: 1,408.97 up 10.80, 0.77%

o TSC Internet: 655.97 down 1.23, -0.19%

o Russell 2000: 462.12 up 0.66, 0.14%

o 30-Year Treasury: 90 21/32 down 3/32, yield 5.925%

In Today's Bulletin:

o Midday Musings: No Big Excitement Follows CPI as Market Awaits a Spark
o Herb on TheStreet: IDT-iots May Want to Heed Lessons Learned From Iridiots

Also on

Wrong! Dispatches from the Front: Bench 'Em

When management teams don't perform, Cramer says, they have to give up the ball.

Online Brokers: Online Trading Lurches Into Low Gear

Online trades are estimated to have grown only 10% to 15% in the second quarter. Online brokerage stocks are holding steady, for now.

Under the Hood: Magellan at $100 Billion: Another Nonevent

But the fund's healthy performance does poke holes in the theory that big is bad.

Brokerages/Wall Street: Striking It Richer at Strike

Strike Technologies is busy securing financing, growing its investors and partners to around 25 from 19.

Dear Dagen: Dear Dagen: Two Faddish Funds Make a Pretty Good Fit

Dow Dogs and the Internet fund are quite divergent strategies. But together, they cover a lot of bases.

Midday Musings: No Big Excitement Follows CPI as Market Awaits a Spark


Justin Lahart

Senior Writer

It's been something of a rocky day for our hero, the stock market.

Things started well. A better than expected June inflation report sent the Treasuries higher -- high enough, in fact, to make it look like they might break above the range they've been in since June, helping stocks to a nice open.

But midmorning, things changed.

European Central Bank


Wim Duisenberg

, surprised bond markets in Europe, saying that the ECB might move toward a tightening stance on monetary policy if monetary and credit expansion continued. German bunds sold off, Treasuries went down in sympathy, and most of the gains in the stock market got erased.


Dow Jones Industrial Average

was lately up 21 to 11,169. It had traded as high as 11,217. The broader

S&P 500

was up 10 to 1408 and the tech-stuffed

Nasdaq Composite Index

was up 12 to 2830. The small-cap

Russell 2000

was up half a point to 462. Internet Sector

index was down 1 to 656.

Breadth was narrowly positive in moderate trading. On the

New York Stock Exchange

, advancers were outpacing decliners 1,547 to 1,214 on 456 million shares, with 93 new 52-week highs and 18 new lows. In

Nasdaq Stock Market

action, advancers were beating decliners 1,896 to 1,748 on 636 million shares, with 164 new highs and 21 new lows.

But traders didn't think the reversal signified all that much, other than a continuation of the ruminative action the market's seen for the last week or so.

"There still seems to be a lot of cash on the sidelines; there still seems to be a lot of positive feelings," said Bob Basel, director of listed trading at

Salomon Smith Barney

. "Maybe a couple more days of consolidation and then we can go higher."

The market is still a bit leery on the


, divided on whether it will raise rates again at its August meeting. (This writer has a six-pack that says the Fed won't go, but before you take that to heart you should know that one of the smart bond reporters here has the other side of that bet.) People are looking to Fed chief

Alan Greenspan's Humphrey-Hawkins

testimony before


next Thursday to help them determine what the real score is on that. The market may not go much of anywhere until then.

Thursday's Midday Watchlist

By Heather Moore
Staff Reporter


(KO) - Get Report

was up 1 13/16 to 63 11/16 after reporting second-quarter earnings of 38 cents a share, in line with the 16-analyst

First Call

estimate but down from the year-ago 48 cents. The year-ago period includes a gain of 3 cents related to the sale of the company's bottling operations in northern and central Italy, and a provision of 2 cents a share from the impairment of certain assets in the global manufacturing system.

On the flip side,

U.S. Airway


was down 2 1/2, or 5.6%, to 41 13/16 after saying it won't meet earnings estimates for the second half of the year. The airline was expected to earn $1.66 a share in the third quarter and $1.62 in the fourth quarter. The carrier said its results have been hurt by recent revenue trends, and higher labor and fuel costs.

Mergers, acquisitions and joint ventures



was tanking 2 3/8, or 60.3%, to 1 9/16 after last night saying it ended merger talks with

Residential Funding

, a unit of

General Motors'

(GM) - Get Report

General Motors Acceptance


Earnings/revenue reports and previews

Adhering to the sell-the-news trend this earnings season,


(AAPL) - Get Report

was down 2 3/8 to 53 9/16 after last night posting second-quarter earnings of 69 cents a share, beating the 19-analyst estimate by a nickel and moving up from the year-ago 65 cents. The Mac maker, whose shares ran up ahead of the announcement, also said it will buy back $500 million in stock.

DSP Communications


was down 5 13/16, or 18.6%, to 25 3/8 after last night posting second-quarter earnings in line with the estimate of 22 cents a share. Today,

Merrill Lynch

lowered the stock to near-term neutral from accumulate, maintaining a long-term buy.

LandAmerica Financial


was down 3 5/8, or 12.8%, to 24 5/8 after last night saying it sees second-quarter earnings of 78 cents to 88 cents a share due to a shift in revenue mix to the company's lower-margin agency business. The two-analyst view called for $1.27 vs. the year-ago $1.47. Today,

Donaldson Lufkin & Jenrette

lowered the stock to market perform from buy.

McKesson HBOC

(MCK) - Get Report

was up 1/8 to 31 1/8 after last night restating earnings from continuing operations for the last there years. It cut earnings for fiscal 1999 by $152.2 million, or 53 cents a share; for 1998, the company lowered earnings by $25.8 million, or 9 cents a share; for 1997, it lowered earnings by $13.5 million, or 5 cents a share. McKesson lowered its revenue for the past three fiscal years by a total of $327.4 million.


(RMBS) - Get Report

was up 9 1/16, or 9.3%, to 106 13/16 after last night reporting third-quarter earnings of 8 cents a share, 2 cents higher than expected.

Rational Software


was down 3 13/16, or 9.6%, to 36 1/4 even after last night topping first-quarter earnings estimates by a penny, logging a profit of 16 cents a share.



was up 11 1/2, or 21.2%, to 66 1/8 after last night beating second-quarter earnings forecasts of 15 cents by 4 cents a share. Today, Merrill Lynch raised the stock to long-term buy from accumulate.

In other earnings news:

Offerings and stock actions

Efficient Networks


was rocketing 32, or 214.1, to 47 3/16 after last night

Credit Suisse First Boston

priced its 4 million-share IPO top-range at $15. The company is a high-speed DSL equipment developer based in Dallas.


BP Amoco


was up 2 3/8 to 120 7/8 after saying it plans to divest around $10 billion of assets over the next three years. The company also announce a "significant" crude oil discovery in deep water offshore Angola.

National Semiconductor


was up 5/16 to 27 15/16 after confirming a

Wall Street Journal

report saying the company developed a single PC chip that integrates most semiconductor content and functions. The company said the chip, called GeodeSC1400, provides online, digital video and browsing functions for the set-top box market.

Time Warner


was off 1 to 76 5/16 after the co-heads of the company's

Warner Bros.


Warner Music Group

, Robert Daly and Terry Semel, said they will leave at the end of the year when their contracts expire.



was up 4 1/8, or 29.1%, to 18 5/16 after last night saying it hired

Morgan Stanley Dean Witter

to explore strategic alternatives. The company said its majority shareholder,


, is refocusing its strategy on companies which operate totally on the Internet.

Herb on TheStreet: IDT-iots May Want to Heed Lessons Learned From Iridiots


Herb Greenberg

Senior Columnist

Whenever you wonder why I write what I write and react the way I react, especially when I run those

stupid emails from





investors who lambaste this column for questioning their company -- don't forget the



"Iridiot" is slang for



investors whose hostility sent this column's Hostile React-O-Meter careening when I first questioned

back in May whether the news on Iridium was about to go from bad to worse. Iridium initially slid into the mid-single digits before bouncing back three weeks ago into the midteens. The stock's rise caused Iridiots to

come out of the woodwork, including one who asked: "Are you ready to eat your last negative words about Iridium??? Have you seen what it's doing lately? Looks pretty green to me in them thar hills, stars, whatever!!" (That prompted the headline: "Iridium's Stock Is Back, and So Are the Iridiots.")

The rest, as they say, is history. Yesterday Iridium sagged 1 7/16, or 18%, to 6 3/4 after



, Iridium's biggest investor, said it wouldn't commit any more money to the struggling satellite company unless it was joined by other investors and lenders. Motorola said the only options for Iridium, at this point, are a) an out-of-court restructuring; b) an in-court restructuring and bankruptcy; or c) a bankruptcy and liquidation. The betting is that it'll be either "a" or "b," but none of the choices are likely to be good for Iridium investors.

Also yesterday,

Credit Suisse First Boston

analyst Cynthia Motz joined the list of analysts who have cut their recommendations to a sell from a hold. After a restructuring, the stock may very well become a "bagel" (Wall Street lingo for zero) if all or most of a new class of stock goes to current debtholders, as is expected.

More is likely to be known within a month. In lieu of a sudden cash windfall, Iridium is generally expected to miss an important debt payment Thursday, and then it has a grace period that lasts until mid-August. And don't be fooled if the stock is resilient in coming days. Iridium is heavily shorted, and the stock will actually hold up if and when short-sellers cover their positions, as they buy the actual Iridium shares they had borrowed to short the stock.

Moral of this story: IDT-iots, beware.

Short Positions

Calling all cults:

After reading this column's back-and-forth with IDT investors, California clinical psychologist

Jerome Silverman

wrote that he believes it's clear the IDT-iots "reflect an additional classic behavioral principle. This has to do with external support for one's pathological condition. If an individual with pathological ideation is surrounded by people who challenge the pathological position there will be a reasonable probability that the position will be re-evaluated, rejected and a healthier one put in place.

"However if the pathological position has external supports -- people who similarly hold that position -- there is often very little chance to have that position re-evaluated, let alone having it modified in a healthier way.

"This is why cults are so powerful an influence on their members. It seems that for many buying a stock is similar to joining a cult. Instead of being investors -- open, alert, considering all information concerning their holding -- they become cultists, cheering the stock in spite of negative data and wanting to kill the messenger who brought it.

"They find cult mates on Internet message boards and in a kind of ritualistic behavior, post wishful predictions like 'up 10% by next month' or 'big takeover coming.' These posts have nothing to do with fact, but by posting them the action itself serves to reassure them and other cultists that all is well and that they have done something in the service of the cult -- e.g. the post and prediction.

"This is similar to primitive peoples who during a drought do a rain dance. It gives them something to do to validate their beliefs and it reaffirms the cultist hope."

Which is where the "springs eternal" comes in.

Back on the Iridiots:


Patrick Drollinger

wonders if I've received any apologies from any Iridium investors. Answer: No, but I have from investors in other cases where I had stirred the cults. (Several recently, in fact, from former investors in

CHS Electronics




"When are we going to see the IPO for


?" asks reader

David Wilfinger

. "Perhaps we could have five lead underwriters and

C. Byron

as the covering analyst ... just a thought."

Chris Byron as covering analyst? No way! He even scares me! (Glad I'm on



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

Catch the premiere of on the FOX News Channel July 17! Join host Brenda Buttner and TSC regulars like Jim Cramer, Herb Greenberg and Dave Kansas. Saturdays at 10 a.m. ET and again on Sundays at 1 p.m. ET.

Copyright 1999,