In Christmas week, if at no other season, a pessimist owes his fellowmen an accounting. . . .
Although crooked, the City of New York is solvent, and it has been paying its debts since it briefly stopped paying them a dozen years ago. Only the older New Yorker will remember the funk of the mid-1970s -- the fiscal crisis, political crisis...
John Dizard writes:
The force of gravity made its expected comeback in the LDC debt market, with prices for the Latin American loans giving up some of the gains they made this fall. The big news, though, or at least the big talk, was about the Bank of Boston's action in charging off $200 million in loans to less developed countries...
An arbitrage opportunity in the personal credit of Donald Trump, tycoon, has presented itself in the junk market (Grant's, December 14)...
At market turning points, absurdity gets up a head of steam. People lose their perspective, and the extreme reading -- gold at $850, the Dow at 2,700, U.S. Treasury bonds at 15% -- comes to seem reasonable instead of unreasonable.
Like young German marrieds, dollars refuse to procreate, and the decline in their rate of expansion is troubling to monetary observers.
The new Grant's Stub Stock Index debuts in this issue on page 11. A stub is a stock in an ultra-leveraged company. In the palmy days of summer, stubs were also known by the dignified term "residual equity interests." Our index is an average of the prices of eight such specimens...
Now that Bank of Boston is telling the truth (as it sees it) about Third World lending, there's no telling where quoted debt prices, or bankstock prices, may wind up...
A reader writes:
One of the more gratifying side effects of the crash is the almost biblical exposure of faked, or manipulated, assets. It's always nice to see justice done in an economic sense.
Heeding the lesson of the perennial Third World crisis -- a problem may be old hat but still financially potent -- one must listen when the Federal Home Loan Bank of Dallas reports ...
For 1988: Long the dollar
Franklin Savings Association, the biggest thrift in Kansas and a leader in the Midwest school of zaitech, or financial technology, proposes to offer a few billion dollars of "mortgage-backed zero coupon equitable redemption notes."
The only eight consecutive, readable pages in The Incredible January Effect, a new book on stock-market seasonality by a pair of finance professors*, are the pages that constitute the bibliography.
For the desperate, banks are now offering "two generation" mortgages in which the eldest son or another heir is expected to assume payments after the owner retires.
Was it an accident that the New York Stock Exchange Financial Index was peaking last year as the World Financial Center, the optimistically named office village rising from landfill near the Hudson in lower Manhattan, was opening? If so, it was an accident of poetry.
When Moody's Investors Service said it was warming up to lower the boom on the debt ratings of a dozen money-center banks, it cited, among other reasons, "the sharp decline in secondary market prices for LDC bank debt." Grant's, too, has had its eye on LDC prices. We have noticed that they have gone up.
By coincidence, news from Beatrice Cos., the ultimate leveraged buyout success story, and Southland Corp., the fledgling LBO problem child, arrived simultaneously...
The United Nations is nearly out of cash, and Javier Perez de Cuellar, the Secretary General, has proposed a plan of action.
Balance-sheet ratios are conventionally computed at book values. Why? For years, Drexel Burnham Lambert has sponsored a market based measure of corporate capitalization. Its idea was the market-adjusted debt, or MAD, ratio. Let the market decide what a company is worth. Take the debt portion of that valuation and divide it by the overall market cap. The answer is MAD.
It is not quite that simple, of course, and Drexel from time to time has introduced statistical refinements and caveats to the basic idea...
Crash or no crash, the personal stock of Donald J. Trump, the New York real-estate celebrity, is up. Up is Trump's favorite direction...
Many would like to forget 1987 -- tap water so quickly followed the champagne -- but how? It is as hard to put out of mind as the year of the lesser crash, 1929. What follows is a list of some emblematic events, miscues and achievements...
Now that the Federal Reserve Board has apparently swung around to the commodity-watching school of monetary management, what will become of the old-fashioned M's? For the time being, they have almost melted away.
Commodities: a crash in reverse
People will dispute the significance of the stock-market collapse to the national economy, but no one in public so far has called it inflationary. Maybe that is worrisome...
Yale, which lost to Harvard, 14-10, invests for perpetuity. Never mind sic transit gloria mundi. The endowment, which totaled a little less than $2 billion after the crash, is expected to last till Judgment Day.
The Monday after the crash, The Wall Street Journal ran a front-page story about irrepressible youth. "Markets May Sink/But for the Yuppies/It's Full Speed Ahead," the headline said, and an anonymous young person elaborated at length...
Two stories, inconclusive but provocative, about liquidity or the lack of it...
Domestic nonfinancial debt passed the $8 trillion mark in September, but nobody held a press conference. Is $8 trillion in borrowing -- corporate, federal, personal and state and local -- too much? It is just enough? Could it possibly be too little?
If a bull market is moonlight in Rio, a bear market is morning in Brooklyn. TVX Broadcast Group, a would-be issuer of high-yield bonds and a case study in financial optimism, looked fetching by moonlight. Then -- the date was October 19 -- the sun came up.
Marshall S. Cogan is the chairman and chief executive officer of Knoll International Holdings. He controls the board of directors. He controls the company (it used to be General Felt). In 1986, the company paid him $3.2 million, cash. Possibly nobody outside the Post Office is more securely employed.
John Dizard writes:
"That eccentric rally in less developed-country debt is slowing down somewhat. You'll recall that LDC paper was one of the few markets to rally in the week of the October crash..."
On November 17, the bank research department of Salomon Brothers figuratively pounded the table: 'Against the backdrop of massive industry restructuring, a modestly favorable economic climate and significant earnings momentum in 1988 and probably 1989, we believe that, for the first time in this decade, the money center banks are poised for a significant secular uptrend in valuation levels that could persist for several years."
Beleaguered property owners are losing their real estate to lenders faster than ever before, with foreclosures headed toward a record-shattering total.
Before the birth of Dan Rather; stock-market panics were outdoor events. Crowds milled around the Stock Exchange and lined the steps of the sub-Treasury Building, hatching rumors, planning bank runs and proving what misery loves. The 1987 collapse represented a technological breakthrough. The weather was perfect -- sunlight as thin as skim milk beamed from a clear blue sky -- but everybody was indoors watching a screen.
The global collapse of stock prices, though initially shrugged off at the White House and in the financial advice columns of the New York Post(hold on, the Post counseled its mutual-fund-owning readers under the postcrash headline, "Rally-ho"), was taken hard by the high-yield debt market.
The collateral value of high-yield bonds has entered a bear market, too. A brokerage firm (it will go nameless) used to lend $150 million against the collateral of junk bonds...
Edward I. Altman, professor of finance at New York University, co-author of Investing in Junk Bonds: Inside the High Yield Debt Market and consultant on high-yield securities, formerly to Morgan Stanley and currently to Merrill Lynch, has produced a new study that his clients may wish he hadn't.
Capitalized for prosperity
Whether a recession is likely or not is one of those questions that economists dispute on the MacNeil/Lehrer Newshour. What is almost beyond debate, however, is that an economic downturn would disappoint broad segments of the American public.
Fails-to-deliver plagued the government market last week, as credit worries prompted the customary lenders of securities not to lend.
What everyone knows about the Great Depression is that the nation's money supply collapsed.... Another "Great Contraction" as Milton Friedman and Anna Schwartz styled the Depression experience, is what nobody needs. How could it happen?
A friend called to make a suggestion.
John Dizard writes:
"Along with the Sri Lankan stock market and gold bullion, Third World debt prices rallied in the week of the crash. Among widely traded credits, prices rose by two and three points. Mexico jumped from a bid of 49-1/2 before the stock market break to a peak of 54 afterwards.
Now that Crash No. 2 is history, it may be useful to reconsider the career of Roger Babson (1875-1967), the man who called the first crash -- who called it, in fact, until he was blue in the face, starting in 1926.
The Babson story is an instructive and humbling one...
The Federal Reserve, obeying one central banker's precept (in a panic, create credit first and ask questions later), but not another (in a currency crisis, raise interest rates) created credit by the carload in the latest banking week.
Hiding Under Desks at Salomon Brothers
Last November The Wall Street Journal disclosed that an athletic young trader at the Tokyo office of Salomon Brothers would choreograph a rising market by leaping on top of his desk and yelling "bond fever!". There were plenty of rallies in those days, plenty of traders and lots of bonhomie.
Nowadays, naturally, people are more inclined to hide under their desks than to jump on them, but the visceral style of investing is dominant again.
Let the record show that the Salomon Brothers list of recommended Japanese stocks includes Japan Air Lines (Grant's, June 29)...
The House Democrats' package also would deny deductions for interest expenses exceeding $5 million a year on debt supporting either the acquisition of the majority of the stock of another corporation or a company's redemption of a majority of its own stock. This change is designed to remove the tax incentive corporations now have to replace equity with debt in order to reduce their taxes. -- The Wall Street Journal, October 14.
When David S. Ruder, chairman of the Securities and Exchange Commission, suggested that an order to halt trading is one regulatory response to a so-called market meltdown -- a collapse precipitated or intensified by program trading -- people began to talk.
FICO, the quasi-governmental agency created to recapitalize the Federal Savings and Loan Insurance Corp., has already made its mark in the credit markets. By borrowing for 30 years and collateralizing that loan with zero-coupon government bonds, the agency has rearranged the zero-coupon yield curve. It has caused a decline in the yields on long-dated zeros and a rise in the yields on short-dated ones. Bargain hunters in the government market, please copy.
The trouble with values in bonds is that they can so quickly become better values. However, the tax-exempt market is cheap by its own standards and by comparison with the stock market...
Four years ago, as the accompanying graph shows, only half of the assets of high-yield mutual funds were rated single -B, or lower, or not rated at all.
Coming soon: a pair of closed-end junk bond funds, the first such investment vehicles (to our knowledge) in the leverage industry.
Big banks are in the leveraged lending business up to their hips, and not only for their own accounts. Gone are the days when loans were made to be planted on one's balance sheet; increasingly, as noted last issue, loans are made to be sold, or "participated," to other banks, so that the LBO-type of loan is communicated from institution to institution like a virus.
Quoted prices of bank loans to Third World countries fell more slowly than usual in the past two weeks.
The learned and well-traveled foreign editor of Barron's, Peter C. Du Bois, called the other day to ask why everyone was picking on Tokyo when the Taipei bourse was so much more absurd.
The first default to hit the fast-growing French commercial paper market has brought to light a curiously familiar attitude toward credit.
"The wealth-building community has been abuzz since Ivan Boesky, exchanging a large check for some juridical leniency, agreed to assist the authorities in cracking the insider trading ring. The persistent question these many months is which big fish would be the next to fry...
Like Peter Lynch, the fully invested Fidelity portfolio manager, Alan Greenspan has a bullish brief.
In praise of compound interest
Tuesday's slump in the bond market pushed a handful of long-dated, off-the-run Treasurys into the rarefied yield territory of 10%. ("Off-the-run" means illiquid and unwatched.)
More dollars zip around the world on an ordinary day than you can imagine. Currency speculators, bond traders and (let us not forget) importers and exporters deal in dollars. CHIPS, the Clearing House Interbank Payments System, which has a membership of 138 banks worldwide, handles daily transactions of $550 billion...
Would you, gentle reader, commit funds for 30 years at 10-1/2%, when you could earn 9-3/8% for one year?
Many debtor countries would rather not pay. They have thought the matter over, summoned the press and said their piece. From the Grant's Third World headline scrapbook...
In one of his big, cheerful books, D. Morier Evans, the 19th century chronicler of panics, fraud and depressions, was moved to reflect on the cost of falling interest rates...
Latest bullish strategy from the City of London: Sell bonds, because they're going down; buy stocks, because they're going up.
Everyone knows that big-capitalization stocks are in while small ones are out, but the accompanying graph drives the point home...
Industrial metals prices are booming. American Metal Market reads as if it were 1974 again, with stories of ferrous-scrap shortages and something like chaos in steel plate.
Harcourt Brace Jovanovich is out with a 132-page paperback titled Prospectus. It is written in the fiduciary style and distributed by The First Boston Corp. ...Critical judgment, as expressed in the bid side of the bond market, is lukewarm.
In the screwball banking week ended last Wednesday, the federal funds rate averaged 7.56%. That was 30 basis points higher from the prior week, which saw no end-of-quarter disruptions and no Wednesday Fedwire outages.
Quoted prices for the sovereign debt of Third World countries continue to weaken. In the past two weeks, Brazilian loans have fallen to 58 cents on the dollar from 60 cents, Mexican loans to 55 cents from 56 cents and Peruvian loans to 10 cents from 14 cents.
The piece last issue on zero-coupon yields has stimulated another idea for parking one's money without inordinate risk. The investment horizon is one year; the bonds to buy are three-year Treasury zeros.
An investment in the new debentures of E-II Holdings is almost an investment in the ruddy-cheeked Donald P. Kelly himself. Kelly is the chief executive of E-II, a 15-business holding company recently detached from BCI Holdings for the purpose of making leveraged acquisitions.
From the there's-more-to-be-made-by-doing-it-than-knocking-it department: Drexel and some of its officers and employees are limited partners holding warrants in BCI...
TOKYO -- The Bank of Japan is increasingly worried that high-flying financial markets will crash, sources at the bank said Monday.
The acerbic and alienated and valiant stock-market columnist for the Japan Economic Journal has resigned. "M.V.P.," as he signed his name, went out last month with a characteristic swipe at the establishment.
Everyone is never bullish
On July 8, 1932, The Wall Street Journal published a brief inspirational message from John D. Rockefeller, who that day turned 93. Optimism from any reputable source was news in 1932, and the old capitalist's salutation got front-page treatment.
The World Bank is one of God's gifts to Wall Street. A triple-A rated, quasi-governmental institution, it issues and trades bonds in big round lots.
"Goldome is going public"
Pricing of 23.5 million Goldome shares is expected any day. A broker for the underwriting syndicate, when asked what the deal looked like, replied evasively: "It's a difficult story."
Difficult and interesting....
The Federal Reserve, which predictably had been expanding its balance sheet at annual rates of 10% and more, has slowed to less than 9%...
Exit Kohlberg; exit Herrlinger
By all accounts, P. David Herrlinger wasn't laughing. Nor was his lawyer, Anthony Covatta. "This is a medical story, not a financial story," said Covatta. "The man is ill; he's not himself."
The proposition . . . that the relationship between a corporation and its directors and debenture holders is contractual, not "fiduciary," in nature, is well settled in this state. -- Jack B. Jacobs, Vice Chancellor, Delaware Chancery Court; memorandum opinion in Continental Illinois National Bank & Trust Co. vs. Hunt International Resources Corp., February 27, 1987.
On May 1, the New York City Health Department, in its regular weekly bulletin of restaurant health-code violations, reported the closing of an establishment it identified only as "Executive Dining Room," One Rockefeller Center.
Quoted prices of Argentine sovereign bank debt have crumbled. On Wednesday, the bid was 47 cents on the dollar. It was 55 cents only two weeks ago.
Until First Boston put its finger on the investment-theme pulse of the Tokyo stock market recently, Japanese finance was a mystery to us.
The youngest stockbroker in the country drives a 1959 Corvette. He is about to install a car telephone to facilitate mobile, two-way communication with his clients, whom he was recently obliged to call from a public phone in the hallways of Greenwich (Conn.) High School.
Daniel Stein, 17, graduated in June...
First there was Beatrice Cos. Next came BCI Holdings, successor to Beatrice in a leveraged buyout. Now comes BCI Holdings and E-II Holdings, two companies where there had been only one.
The Beatrice story is short and sweet and complex...
The table on page eight has become an annual fixture in Grant's, and the trend of the data has also become predictable.
When Telerate recently added a third decimal place to its continuously updated Treasury-bond yield display -- suggesting that precision in yield to the thousandth place is a negotiable piece of financial information -- a light bulb should have clicked on. It didn't, but Ron Ryan, founder of the Ryan Financial Strategy Group and a fount of ideas on fixed-income subjects, had some helpful comments.
Commodity indices: skip the CRB
As every schoolboy operating in the Chicago bond pits knows by now, the Commodity Research Bureau Futures Index is down. The most closely watched commodity index, the CRB, terrified the bond market on the way up. Now that it is off its highs, the market is breathing easier.
Paul A. Volcker, newly minted chairman of the Federal Reserve Board, met the press on Saturday, October 6, 1979. Staring into the faces of the baffled reporters, Volcker declared that the Fed henceforth would target the money supply, not the money market.
News that BankAmerica Corp. will reserve an additional $1.1 billion against its loans to Third World countries was met with aplomb....
We welcome our new publisher, Patricia Kavanagh, to the staff of Grant's...
So blue is the sky that credit risk is almost universally thought to be yesterday's worry, or tomorrow's. There are lots of bears on interest rates, but few on credit. Passing strange, then, that such a skeptic should occupy the chairman's office of a major bond insurer.
The junk-bond default rate is easy to calculate but hard to interpret. Simply add up the par value of public junk defaults and divide by the par value of public junk outstanding. Presto: the default rate.
Very deeply hidden assets
Via a Boston friend, a new report on Japanese real estate companies from Warburg Securities in Tokyo has arrived. The report is brand new...
The recent rise in interest rates has depressed bond price levels well below their call prices. As a result, yield spreads between callable and call protected issues have tightened dramatically.
Problems up, examiner down
Robert L. Clarke is the Comptroller of the Currency. The Comptroller's franchise is unpalatable facts. Possibly he is too negative -- as he would be the first to admit, there are notable pockets of strength in the banking business -- but his arguments always get a sympathetic hearing around here.
The Municipal Assistance Corp. 6-7/8s of 2007 were quoted the other day at a price to yield 8.07% (free of New York and federal taxes), and a reader called to put in a good word for them.
The Japanese hold no monopoly on speculation. London is holding a new issue party, and a long queue of punters waited anxiously in the rain...
John Davenport, a father of seven, author, essayist, past editor of Barron's and journalistic craftsman, died in Red Bank, N.J., last Monday. He was 82 years old.
The new debt data are down. April's reading, just out, represents growth (annualized, over a three-month period) of a mere 7.1%. In March, the growth rate was 9.7%. In February, it was 12.7%.
Last January, after Republic National Bank of New York disclosed a write-down of Third World debt, leading bank analysts agreed that the news meant nothing. They expressed optimism on money-center banking.
The significance of the Citicorp bombshell may well be, as many suggest, that the era of subsidized capital for Third World borrowers is finally over. On the other hand...
In terms of valuation, we find Yasuda Trust's prospective [price earnings ratio] to be comparatively low, both in relationship to the banking sector as a whole, and to the market.
The market in publicly traded Third World bank debt was paralyzed by Citicorp's $3 billion disclosure. Traders, assuming that $5 billion to $10 billion in new supply was about to land on their heads -- only $8 billion's worth changed hands in 1986, according to Salomon Brothers -- did nothing.
Thanks to the advent of computer technology, a gigantic bull market in financial transactions has been accommodated, and $1 trillion's worth of traffic is processed every day over the principal New York-based large-dollar transfer networks.
Now that the dollar may be scraping bottom, what about bill rates? Will the same foreign central banks stop buying bills? Will they let their existing bill holdings run off, or mature?
Now that the truth is as popular as Vanna White, we've been waiting for Paul A. Volcker to own up to the fact that the Federal Reserve is possibly the most leveraged bank in the country.
The country's largest bank fell out of investors' favor years ago; since 1983, to judge by relative price-earnings ratios, sentiment has actually rallied....
Not to pick on Japan, but a revealing case of the jitters has struck the Tokyo bond market. B
In 1929, United Founders Corp. was one of the largest ( $1 billion of assets), oldest (seven years of continuous operations) and most respected investment trusts in the country.
The more we asked about the accounting details of Citicorp's $3 billion addition to reserves, the more we realized we weren't the only ones in the dark.
When the Fed snugs, then stops snugging, is that unsnugging? In this space two weeks ago, a shift to net borrowed reserves was reported ...
Inflation-minded investors have expressed themselves through deeds, not words, this year. Resource and cyclical stocks are up and commodity prices are booming, but inflationist talk is scarce.
Inflation-minded investors have expressed themselves through deeds, not words, this year. Resource and cyclical stocks are up and commodity prices are booming, but inflationist talk is scarce.
If gold goes up, yields, within a year, tend to follow.
The difference between Treasury-bill yields and Eurodollar-deposit yields -- the so-called TED spread -- is widening, usually a sign of credit distress. The government yield curve is deteriorating, a sign of interest-rate fear. Some details...
SEATTLE -- King County Jail began accepting bank credit cards as payment for bail and some fines. -- from the American Banker, May 8.
The bulls have overdone it in LTV, as John Boland reports from Baltimore...
In quick succession, U.S. News & World Report published a cover with the beckoning headline "How You Can Play the Global Money Game," and underwriters issued The Malaysia Fund.
Owens-Illinois Inc. was founded in a panic year (1903), reorganized in another panic year (1907) and restructured in a blue-sky, onward-and-upward year (1987). It is the nation's leading manufacturer of glass containers, with interests in plastics, forest products, health care and mortgage banking, and it has rung up five years of rising net income on flat sales...
"In no way could we handle the FSLIC's problems," L. William Seidman, chairman of the Federal Deposit Insurance Corp., recently told the Association of Reserve City Bankers. "Our resources are beginning to show some strain from current conditions."
Of a piece with the rebound in farm commodities and Iowa farmland is the rally in farm banks. For instance, First Interstate of Iowa, a Des Moines-based bank holding company (Grant's, April 21, 1986), turned profitable in the first quarter...
Mexico prophecy and net borrowed reserves
News flash: Mexican sovereign debt -- quoted at 58 cents to 60 cents on the dollar to yield, on a current basis, about 13-1/8% -- is in demand by a monied American who asks to remain anonymous.
If, as Prime Minister Yasuhiro Nakasone promised Thursday, Japanese interest rates are coming down, they aren't coming down by very much. Zero per cent -- major resistance in any hemisphere -- is closing in fast.
At or near a market top, Omniscient Securities, the perfect brokerage firm, would startle the Street by scaling back. It would stop hiring, cut trading positions, slash overhead and shelve plans for a move to sumptuous new bull-market quarters. Seeing the future clearly, it would do exactly what Drexel Burnham Lambert, under the gun of a federal investigation, is doing. It would retrench.
As the bond market lost consciousness the other day, an economist was plaintively quoted in The Wall Street Journal. The man, identified as a bank economist, complained that the Federal Reserve has abdicated financial leadership. Nobody was running the bond market any more.
Government-insured mortgage-backed securities now fetch higher yields than BBB-rated corporates and utilities.
Our stable of credit indices is larger by one with this issue. Behold the Grant's Third World Debt Index.
The question of the hour, now that yields are up, is when to buy bonds again, and that was the question we put to Van Hoisington, the bond investor who has been bullish and right for most of the past three years. Hoisington is safely out of the market now -- got out in March, just before the deluge, and he says he's grateful, not proud.
Land of the rising prices
"Eurofriend," our anonymity-seeking investment friend who lives in London ( and travels to Tokyo), reports on a new wrinkle in Japanese markets...
Most senior issues have negative pledge clauses [meaning prohibitions against pledging, or mortgaging, unsecured corporate assets]; most subordinated debt issues do not.
As statesmen talked up the bond market Thursday, the commodity markets rallied all by themselves. The Commodity Research Bureau futures index vaulted above the 220 mark (which the Street has been conditioned to view as a kind of inflation threshold), and the spot industrial commodity price index thrust to new recovery highs.
On Wednesday, April 15, the bond and money markets were more oversold -- more roundly disliked by speculators -- than at any time in recent memory.
The mugging of the bond market raised the stimulating question of where the liquidity went.
On April 6, Potomac Edison 7.16% sinking-fund preferred was quoted, ex-dividend, at 101-3/8-102-1/4. On April 15, it was quoted at 90-97.
In the past month, bond-market volatility has doubled, inflicting stunning losses on mortgage and tax-exempt portfolios...
Monday, the Bond Buyer 40-bond tax-exempt yield index stood at 8.28%. Tuesday, in what seemed a typo, it vaulted to 8.86%.
What next? Investors and pundits were asked for their outlook now that the financial scenery has been slightly rearranged...
Foreign central banks, in order to support the dollar, buy dollars, and then they buy Treasury bills. They park the bills with the Federal Reserve System, which discloses the size of the hoard each week. As the graph shows, the numbers are stupendous.
Corporate credit quality continues to sink, with banks deteriorating even more briskly than industrial companies and with utilities showing some new signs of weakness. There had been predictions of a credit turnaround in 1987, but the news to date has actually been worse than it was in 1986...
The interest-rate swap market is new, fast-growing, cosmopolitan, de rigueur and -- in the main -- unintelligible. It is so complex that written discussions of the mechanics of swapping are usually illustrated with schematic diagrams, like medical texts.
Growth in the Federal Reserve's balance sheet -- specifically in the aggregate called adjusted Fed credit -- virtually stopped in mid-January. Growth in permanent, or nonborrowed, bank reserves, has also been flat for three months. Growth in all the M's has slowed.
"I'm not concerned with myself. I'm trying to get bigger so I'll have more influence. It's almost like a religious fervor." -- Ted Turner in Fortune, July 7, 1986.
Last summer, the Dime Savings Bank of New York was prepared to lend against the presumptive strength of real estate instead of against the income statement of the borrower...
Notes from the 10th annual Drexel Burnham High-Yield Bond Conference in Beverly Hills, gleaned over the telephone in New York by a reporter who wasn't invited...
We would like to observe, as a sequel to last issue's note on the CPI, that the stock market has evidently positioned itself for any inflationary contingency up to and including a reappointment of G. William Miller to the Federal Reserve Board.
The front page of the latest issue of the old gray lady of the fixed-income markets, Moody's Bond Record, notes that utility yields have fallen below industrial yields.
Joe Rosenberg is a connoisseur of extremes. His investment policy is to keep his head when all around him are losing theirs -- and then to buy or sell the ears off the appropriate market. He has scored his biggest coups when the crowd was either gleeful or despairing, for, as he has said, "our greatest dreams and worst fears are never realized." His style is to foul off a few pitches but ultimately to connect, and over the years he has hit for power and average alike.
Central banks "print" more money
The Federal Reserve disclosed a stunning $7.5 billion rise in the volume of U.S. government securities it holds for the accounts of foreign central banks. It was a gigantic surge and mirrored the staggering scale of central-bank intervention to support the dollar.
Since long before the buttonwood tree, man has searched for the surefire investment. South Sea stock, canal bonds, utility-holding-company shares, U.S. savings bonds, growth stocks -- each has gone up, but then again, each has gone down, too. Now comes Chase Manhattan Corp. with a new idea.
The old CPI futures contract is dead. Long live the new CPI futures contract.
The Allied deal (Grant's, March 9) was a success....
The Securities and Exchange Commission has approved a significant reduction in margin requirements for mortgage-backed securities as well as smaller margin reductions for corporate, tax-exempt and government bonds (Release No. 34-24144, for the record).
The relentless rise of the Nikkei Dow has provoked the scorn of the stock market columnist of the Japan Economic Journal, an individual who signs his or her name only "M.V.P."...
The pell-mell growth of the perpetual floating-rate note market in London was news. Its periodic collapse has been news. But its easygoing approach to credit and its big-picture impatience with details haven't been treated as news because they aren't news. They are its signature.
Peace and quiet continue to vex the government bond market. Having prepared itself for almost any fixed income contingency except equilibrium, the Street must cope with something like dead calm.
Inflation is down and something like prosperity rules, but banking -- the traditional, money-lending end of the business -- is unwell.
Arguably, the notable feature of the Third World debt market isn't its weakness (although prices have been marked down recently) but its implacable optimism.
Yea, verily, a gold standard
If the dollar were officially convertible into gold at $400 an ounce, would the financial landscape look appreciably different than it does today?
A year ago, what the market wanted was current-coupon government bonds... As yields collapsed, the market acquired a taste for off-the-run governments... Lately, of course, the market has turned to almost anything. Yield spreads have narrowed throughout the corporate sector, and junk bonds have shone.
According to the theory of the credit cycle, lenders are most courageous when they ought to be most fearful.
t this particular time, people want common stocks. They want them despite a paltry 2.60% dividend yield on the Standard & Poor's 400 stock index, a reading within a hair of the record low of 2.46% set in the fateful top-making month of January 1973...
Nippon Telegraph & Telephone, which came to market last month at the equivalent of $7,770 a share and which has vaulted (despite a promised drop in earnings this year) to the equivalent of $17,582 a share, is a phenomenon.
The accompanying graph depicts the dog that didn't bark. What the long-dated Treasury bond has been doing for the past 11 months is nothing...
Tucked away in the back of The Wall Street Journal every Wednesday are the vital signs of 29 closed-end bond funds.
During the recent Brazil fever, the free-market price of Brazilian bank debt was quoted as low as 61, down from 75 in late January. Bank stocks came under pressure, but an off-the-record meeting of institutional investors was treated to a novel and bullish view of Citicorp. And a new blind pool was successfully (and ironically) launched.
A footnote to the latest Federal Reserve balance sheet helps to clarify the February 22 dollar-propping agreement of the Group of Six in Paris.