Weekend Report: Developments at Compaq and Texaco, and a Word on Bonds
In all, it's been a pretty sleepy weekend on the financial front thus far, with minor news items on
Compaq
(CPQ)
and
Texaco
(TX) - Get Report
providing some relief from the tedium.
Perhaps the most intriguing tidbit in the weekend wires and papers is outside the companies arena. In Sunday's
Washington Post
,
Fed
reporter
John Berry
has an unsourced characterization of last week's bond market selloff as reflecting "widespread misinterpretation" of Fed Chairman
Alan Greenspan's
remarks on inflation and the forces that have been keeping it so low.
"There was widespread misinterpretation of a speech by Federal Reserve Chairman Alan Greenspan in which he emphasized that large productivity gains are keeping costs and inflation low," Berry writes in his very short Sunday
column. "Most analysts seized instead on his usual warnings that a continued drop in unemployment could cause inflationary problems."
(Greenspan's warning, in Greenspan's words, was this: "Although productivity has accelerated in recent years, the impressive strength of domestic demand, in part driven by sharply rising equity prices, has meant that the substitution of capital for labor has been inadequate to prevent us from steadily depleting the pool of available workers. This worker depletion constitutes a critical upside risk to the inflation outlook because it presumably cannot continue without eventually putting increasing pressure on labor markets and on costs.")
Will the benchmark 30-year bond's yield retreat from its 11-month high yield of 5.81% tomorrow now that Berry has shown investors the error of their ways? Or will they steadfastly continue to commit vast sums of capital to such an obviously wrong take on the chairman's remarks? Only the Shadow knows...
In other news, Compaq is expected to announce four exclusive distributors for its products on Monday,
Dow Jones
reported. The distributors are
Ingram Micro
,
Tech Data Corp.
(TECD) - Get Report
,
Inacom
(ICO)
and
Merisel
(MSEL)
. The move is Compaq's latest effort to improve its distribution system to better compete with
Dell
(DELL) - Get Report
.
In the oil sector,
Bloomberg
says
Chevron
(CHV)
is in slow-moving talks to buy Texaco. If a deal ever results, it probably won't be for months, because of Texaco's refining alliances, which would have to be scrapped at huge expense,
Bloomberg
reports.
In other news,
Teleglobe
(TGO)
is expected Monday to announce a $5 billion plan to connect 160 cities around the world with high-capacity fiber for Internet and data traffic, the
Wall Street Journal Interactive Edition
reported yesterday.
In small-cap news, the Netherlands'
Royal Philips Electronics
announced today that it will buy speech technology company
Voice Control Systems
(VCSI)
for $4 a share in cash. VCSI closed Friday at 3 3/16.
Finally, U.S. Fortune 500 utility
(GPU)
is buying
Transmission Pipelines Australia
for $675 million,
Dow
reports.
In the Papers
The weekend financial press is fairly thin this week.
Barron's
has a bullish item on
Schlumberger
(SLB) - Get Report
, saying rising oil prices could put the company back on a fast-growth track, goosing the stock price.
There's a bearish item in the weekly on
Anheuser-Busch
(BUD) - Get Report
, saying that unless earnings are about to spurt (which no one's expecting), the stock looks toppy.
Humana
(HUM) - Get Report
is the subject of a negative feature in
Barron's
, for briefing its board last fall on the likelihood that contract negotiations with
Columbia/HCA
(COL)
would hurt the managed-care concern. A month before badly missing first-quarter earnings estimates in early April, the story says, Humana reassured shareholders and analysts about the contract in a meeting.
The weekly has a positive feature on S&Ls, saying that many newly public thrifts are undervalued. The favorably mentioned include:
CFS Bancorp
(CITZ)
,
Hudson River Bancorp
(HRBT)
,
South Jersey Financial
(SJFC)
,
Lincoln Bancorp
(LNCB)
,
First Place Financial
(FPFC)
, and
Mystic Financial
(MYST)
.
Fund managers profiled in the weekend press include Beth Cotner of
(PNVYX)
Putnam Investors, in
Barron's
, and Bernice Behar of
(TAEMX)
John Hancock Emerging Growth, in
The New York Times
.
Also in the
Times
Money & Business
section, a slap at
Salon Internet's
IPO, slated for next month, calling it "a flawed business model."
