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December 18, 1992, Vol. 10, No. 24

This is your interest rate

Mr. Market has many opinions, and he changes them by the day. Open a newspaper to the commodity page and run your eye down the list of financial futures prices. Each price implies an interest rate.

Le contrary indicator

PARIS -- French trade officials and business representatives are so pessimistic about prospects for the U.S. economy...

Change of ownership

The Equitable Building, 120 Broadway (Grant's, April 24), was the skyscraper that prospered in the 1920s, suffered in the 1930s and filed for bankruptcy protection in 1941.

Steal a line

The date was Feb. 2, 1983, and the change-minded President was Ronald Reagan. In fact, the great 1980s' expansion was already under way...

Pushing the limits

The new semiannual survey by the National Association of Purchasing Management harks back to happier days in America: to rising house prices, high nominal interest rates and redundant layers of white-collar employment at big, moldering corporations...

Out in the cold

Through some administrative snafu, no invitation to the Little Rock economic summit was received by this office. We wish we had been there to ask why Grant Tensor Geophysical Corp. can't liquefy its receivables....

Deflation moves south

"Exceeding even the most optimistic forecasts, the cost of living increased only 0.5% in November, while wholesale prices fell an unprecedented 1.8%. The average shows an also unparalleled 0.7% drop for the so-called combined prices." The country? Argentina. Repeat: Argentina.

The golden dog

The measure of how long a person has been bullish on gold is how miserable he feels. Longtime bulls wince at the sound of their own hopeful voices.

Ingenuity update

Harvey C. Branch, a Baltimore venture capitalist, proposes a plan of action to exploit the credit contraction. He would mobilize a portfolio of Treasury bills. The bills would collateralize loans to companies that couldn't otherwise borrow from a bank...

Monetary plums from the chairman

A little like the Standard & Poor's 500, the Federal Reserve Board continues to set upside records.

December 4, 1992, Vol. 10, No. 23

How can there be a recovery without

Being bullish does not come easily to some of us, but we are doing our best. At Grant's, we are bullish only on business activity, not on the stock or bond markets...

Form a line, please

"Dear Friend of Marvel," writes a shareholder relations department officer of Marvel Entertainment Group, the biggest name in comic books on the continent, "Enclosed are the financial materials you requested...

Cold northerly winds

The last Thursday in November isn't a holiday in Canada. On Thanksgiving Day in America, the Dominion Bond Rating Service disclosed that it was putting the Province of Ontario, which it currently rates a low AA, under surveillance...

Leanest and meanest

o begin, a modest syllogism: Good investment ideas are always pushed to extremes; just-in-time inventory management is a good investment idea; therefore, just-in-time will be pushed to an extreme.

Points of light

If, as and when the economic rain lets up, commodity prices will rise again. On average, they haven't risen yet, but there are some hopeful exceptions. Gypsum wallboard -- a home construction staple -- is one case in point.

Recycled junk

A highly leveraged, vertically integrated, late-1980s' vintage holding company is asking for your help. Ivex Packaging Corp. is in the market: to borrow $165 million.

Gold with a yield

Another speculative-grade company has taken a deal on the road. Coeur d'Alene Mines is offering $75 million of 10-year convertible debentures.

Trust in government

A new report on the interbank lending market prepared under the auspices of the Bank for International Settlements addresses the issue of systemwide banking risk.

Sitting on the funds rate

Over the past several trading days, the federal funds rate has vaulted over the Federal Reserve's presumed 3-3/4% target range.

November 20, 1992, Vol. 10, No. 22

The biggest surprise

Corporate loan demand will shrink next year, according to a pre-election survey of chief financial officers of the biggest U.S. corporations.

Shrinking now

If Wall Street has a faster friend than Sen. Alfonse D'Amato, the compassionate New York Republican, it is the positively sloped yield curve of Alan Greenspan, the generous Federal Reserve Board chairman. Investment banks and brokerage firms continue to feast on positive carry.

Rushdie is bearish

An Iranian foundation said today that it was able to increase the reward for killing the British author Salman Rushdie because the original $2 million had been profitably invested...

Opportunity in fat

Cholestech is a company tailor-made for the 1992 bull market. Not the least important thing is that its stock symbol has four letters, CTEC. It is therefore a NASDAQ issue, and the NASDAQ market is "the place to be." The Wall Street Journal has said so.

What banks want now

What banks want is mutual funds. Only last week, the league of little banks, the Independent Bankers Association of America, invited some 31 investment companies to bid for the exclusive right to distribute their mutual funds...

As seen on TV

The role of the television tube in the bond market is the subject of some original new research by a man who, quoting Plato and Walter Wriston, expects yields to rise next year.

The ugliest double-A

Ontario Hydro, the largest electric utility in North America, is a fossil of the last great inflation. It is debt-laden, inefficient, unpopular, cash-flow negative and (because the Province of Ontario, Canada's most populous province, stands behind its debt) double-A rated.

Fed-watching 101

The sum of business loans, real-estate loans and personal loans at the nation's large, weekly reporting banks has done more than stop falling. Ever since September, it has started rising.

November 6, 1992, Vol. 10, No. 21

Dewey defeats Truman

"I got fired by a client over the weekend who happened to be my mother," a bearish hedge-fund investor confessed on Election Day. "But that's not the best part. The best part is that the only money she had in the fund is the money I gave her." When the blood is running in the bearish streets, wise bulls take notice.

Yield-curve bubble

With all the talk about "character" in politics, people have forgotten about character in the Treasury market. Who is the marginal buyer of short-dated securities today? Is it a grandmother or a bank trust-department officer or a highly leveraged, highly hopeful speculator?

Rolling thunder

At this writing, H. Ross Perot has not won the election, but the issuance of federal debt has continued, vindicating one of Perot's top campaign predictions.

Coors in the '90s

Manufacturing and trade inventories, relative to sales, may stand at record-low levels, but more and more Coors is on the shelf.

Why not Italy?

Jeremy Grantham, eschewing a lectern, walked among the conference-goers and urged them, in an unamplified voice, "downplay the U.S. equity market, and up-play foreign markets."

'Just cash flow'

After the talking was over, a man at the conference told a real-estate story.

Loud and clear

Like the economy (we say with fingers tightly crossed), radio is seeing better days.

Communists trade bonds

"Our view is that gold has not changed. The world has." So Timothy O'Neill, general partner of Goldman, Sachs & Co., told the Grant's conference. For gold investors, the change, of course, has been for the worse.

California nightmare

The Golden State, Lee Mikles, Beverly Hills-based short-seller, told the conference-goers, still has its weather but no longer its economy. "

Borrowing at 5.4%

We were on the phone with the owner of a solvent and liquid Virginia business. His pricing is weak and his inventories are high, the man said, but one augury, at least, has turned bullish. His bank...

Lots of Fed credit

In the United States during the past week, M-2 and bank loans turned down (following a short string of stiffening data), and yields on medium-term notes of the General Motors Acceptance Corp. turned up.

October 23, 1992, Vol. 10, No. 20

Goodbye to all that

The Hawthorne plant of the Western Electric Co. near Chicago was the site of a series of landmark experiments in industrial psychology in the 1920s and 1930s.

Changing of the guard

Jeremy Diamond has been named the publisher of Grant's Interest Rate Observer, succeeding Patricia Kavanagh, who has been named president of The Interest Rate Publishing Corp. Grant's has its own holding company.

Consider the source

An essay in the September 25 letter of the Federal Reserve Bank of San Francisco laid out the causes of the national economic funk and closed with a startling, un-Fed-like prediction -- lower interest rates.

Disasterville

"Bankruptcy 1995: The Coming Collapse of America and How to Stop It," by Harry E. Figgie Jr., is H. Ross Perot between hard covers.

Deflation's progress

Van Hoisington, bond investor par excellence of Austin, Texas, recently surveyed the economy and found it wanting.

Boom-time souvenir

You have read -- we have written -- about the junk-bond market's second childhood. What may best convey this reversion to the spirit of 1988 is not the ugliest troll of the new-issue litter but a company that the investment bankers deem to be not so bad.

Never busier

It is all very well to have theories, and Grant's has its share: that economic growth may furnish surprises on the upside, that interest rates may therefore continue to rise and that people are not as financially strapped as they seem.

Specter of prudence

Marc Perkins, the Florida investor who saw the savings and loan calamity coming a mile away, will accept no part of the bullish thesis that the credit contraction is ending.

Reflation must wait

If deflation is (or may be) bottoming out in the United States, there is no such hope in Japan. Akio Mikuni, proprietor of a Tokyo-based bond rating service, student of Japanese credit markets and (not least) a regular Grant's advertiser, remains bearish, with one caveat.

Japanese bank disease:

In Japan, as in the United States, the weakest banks are the big-city banks. Could sophisticated, urban living be the cause of gullible lending?

Monetary stirrings?

Those of us keeping vigil by the nation's monetary sickbed must not confuse a faint pulse with lusty good health. Nevertheless, business loans in September registered a $2.5 billion increase...

October 9, 1992, Vol. 10, No. 19

Heaps of dry tinder

On paper, it would seem to pay a banker, and pay him handsomely, to borrow short and lend long. ...Years ago, such an alignment of monetary stars would have caused people to drop everything and buy a gold mine. Now they buy bond funds.

Beyond AT&T

PRI, the governing Institutional Revolutionary Party of Mexico, a political movement long synonymous with the Mexican state, is launching its own credit card, Reuters reported from Mexico City.

Signs of life

"The 1980s' real-estate guys, what they're saying is, 'I'm back,' " Frederick E. "Shad" Rowe, Dallas money manager and Grant's correspondent reported the other day. "NationsBank -- you know, formerly NCNB, 'No Cash for Nobody' -- NationsBank is out looking for loans. I'm telling you, it's unbelievable."

Still bullish on winter

Natural-gas and heating-oil speculators are not the only persons thanking the gods who live on Mount Pinatubo, in advance, for possibly staving off global warming for another few years ...

Bullish on 'I0s'

No interest-rate spike would be too high for the martyrs who own "interest-only" mortgage strips, better known as IOs. Someone must own them, we gather, because they exist, but nobody is coming forward to admit it.

Bar the door

Seventy-odd years after it invented the overhead garage door, Overhead Door Corp., in cooperation with First Boston Corp., is trying to reinvent the 1988-era junk bond.

Not so terrible

U.S. retailers showed a 3.4% increase in sales activity in September over the like period last year... However, once adjusted for inflation, this increase is nearly nullified, reflecting a continuing sluggish economy.

$1 trillion a day

CHIPS. The Clearing House Interbank Payments System, the New York-based computer network connecting some 125 banks worldwide, logged its busiest month ever in September. Daily average volume was in excess of $1 trillion.

September 25, 1992, Vol. 10, No. 18

Herr 'Henry Kaufman ventures a forecast

What the Bundesbank should do is not the investor's question. The question is what it will do. The collapse of the European rate mechanism casts the German authorities in a difficult and idealized role, that of the Last Best Hope for Paper Money.

Forgive us our debts

When, in the mid-1980s, the Calvary Church set out to expand along Highway 51 in south Charlotte, N.C., it borrowed $23 million....

'Hello? Get out!'

Citibank's "Wall Street Comes to Main Street " marketing campaign alarms one of our subscribers.

Bullish on winter

The rally in natural gas is usually explained by forces other than the onset of global cooling -- by the collapse in domestic drilling activity, for example, or by the damage done to offshore drilling platforms by Hurricane Andrew...

Memo to ourselves

Years ago, in the Carter term, a stockbroker tried to explain to a customer what Schlumberger did. "It goes to 100," the broker said, exaggerating only a little bit. "Then it splits three-for-two. Then it goes back to 100 again."

Bearish on bonds

The nearby table, produced by the ingenious people at Ryan Labs, makes the case against bonds indelible. ..

Wasn't that a bank?

Allied Capital Corp., lender to small business, recently financed the conversion of a defunct savings-and-loan branch into a fast-food restaurant.

Yield for sale

The cold war is over, the chairman of American Airlines is bearish on the airline business and a patch of the Mojave Desert has been turned into a jet-plane parking lot. Now comes McDonnell Douglas to issue medium-term notes, $550 million worth.

The dog didn't bark

The credit and monetary news gives little enough support to our hunch (expressed at length inside this issue) that this year might be 1979 in reverse.

September 11, 1992, Vol. 10, No. 17

Interest rate anarchy

To the average American, who can make no more sense out of the European Monetary System than he can of the battle lines in Bosnia-Herzegovina, the question is how European interest rates may affect U.S. investments. To a European, who only knows that America is cheap, the question is whether low dollar interest rates are exportable.

More spots on ties

Let the bond market have its Johnson Redhook. Grant's is sticking with Mr. Dry Cleaning, William Seitz, executive director of the Neighborhood Cleaners Association.

Tax woes for Citi?

Discussion of that purloined Comptroller's examination report concerning Citicorp Mortgage Inc. seemed to overlook an important tax angle.

Three shifts a day

News of record-high U.S. currency in circulation has a superficially Latino flavor. The milestone, $317.8 billion, recorded September 2, was a little more than $1 billion higher than the old record set August 12.

Asian space to let

The real-estate slump is moving across the broad Pacific, according to a Reuters dispatch from Singapore...

They won't pay

Business activity is getting better (the administration keeps saying so), and the supply of overdue debt is ample, to say the least. Nonetheless, the stocks of investor-owned debt-collection companies have been some of the best unheralded short sales of 1992.

Calling all bulls

Proler International, the New York Stock Exchange-listed scrap-metal dealer, is truly going international. It is exiting the domestic scrap business...

Only half bullish

Just a few months ago, the deutschemark was a compelling buy. If it keeps on appreciating at current, vertical rates, it's going to become a compelling sale.

God bless the foreigners

About the only signs of life in our Annualized Rates of Growth table have been planted there by central banks.

August 14, 1992, Vol. 10, No. 16

Journey to the center of the curve

Almost every market in the United States is stretched to an extreme of valuation. What makes that fact all the more remarkable is that, to most people, it doesn't seem unusual.

Uruguay of the North

Liquidating monetary gold -- a trade lately associated with the central banks of Belgium and Uruguay -- is a longstanding policy of Canada.

Down 85%

"Everywhere you turn, there is dirt flying," an enthusiastic custom-home builder in the northern suburbs of Dallas was recently quoted as

Scorecard economics

Rod McKnew, Ph.D. economist with O'Connor & Co., Chicago, keeps score on the economy with a unique system of his own devising. "Let's look at the world as if we had on a green visor and as if we were accountants," he says cheerfully. "Let's not think."

Barn doors slam

To the list of luminous borrowers who gave their banks everything except a set of consolidated financial statements, because the numbers did not even exist, add Melvin Simon & Associates, developers of Mall of America...

Coincidentally weak

When a recession ends -- and this one is supposed to be history -- growth begins. That is the law, and you can look it up in the Survey of Current Business.

Next-best investment?

If paying off your credit-card debt is the best investment in America (Grant's, July 31), is liquidating your mortgage the second-best?

How much longer?

"This has to be the lowest short-term rate ever offered on a forward basis for a 30-year bond that was not even issued," a New York trader marveled to Grant's.

No junk jitters — yet

Computervision, one of the experimental companies in the 1980s' Shearson Lehman Brothers debt laboratory, is trying to recapitalize.

Deflation takes no vacation

As interest rates make new lows, corporate bankruptcy filings approach old highs.

Up with low finance

While purchasing-power parity is subjective and hard to measure, the influx of foreign tourists into American stores is objective and tangible.

July 31, 1992, Vol. 10, No. 15

More credit than they wanted

From a reader comes the most cogent financial syllogism of the year.

What building boom?

"For you triple-dippers out there," a brokerage-house economist wrote recently in that omniscient, brokerage-house way, "have you looked at the latest reports from the Mortgage Bankers Association?

Foreigners yield more

The omission by Chairman Alan Greenspan of any mention, however fleeting or subtle, of the dollar exchange rate in his prepared Humphrey-Hawkins testimony before the Senate Banking Committee on July 21 must have annoyed the foreign central bankers who had spent good money trying to reverse the dollar's fall only the day before.

"Am I obsolete?"

What does it mean, he asks, when a seat on the Chicago Mercantile Exchange trades at a big premium to a seat on the New York Stock Exchange...?

Memo to Bill Clinton

In response to a rumor that the government is preparing to mark its monetary gold to market -- a reader called last week not to swear by the story but to pass it on ...

Through Quantum's prism

By rights, Quantum Chemical Corp. should be in clover. The dollar is weak and chemical exports are strong. The recession is over, they say, and industrial commodity prices (scrap metal prices, for example) have rallied....

Quantum, please copy

In a bull market, as Grant's has been so slow to learn, the glass is always half full, never half empty. Very well, then: 75% of the directors of the Shanghai Chlor-Alkali Chemical Co. are not members of the company branch of the Chinese Communist Party.

With their feet

There aren't enough moving vans in California to accommodate the surging outbound traffic...

Putnam Berkley sold

Bank of America was the sole bidder for 200 Madison Ave....

C-Span — Over here!'

The editor of Grant's was scheduled to appear as a witness in hearings before the House Banking Committee on July 30. Following is the text of his prepared testimony...

Let the bull speak

Van Hoisington, head of Hoisington Investment Management Co., Austin, Texas, is not only bullish on bonds but also fully invested.

July 17, 1992, Vol. 10, No. 14

A modest proposal

The Grant's 1992 national presidential platform is complete and ready for dissemination to the people. As we are a one-issue party, our platform is brief and to the point. We demand a two-for-one split in government interest rates.

Still more loathing

"Leading bullion houses are diversifying into the base metals market because of a slump in the gold business, and they are looking at other profitable areas such as oil..."

South of the 38th

"About 100 investors protested outside the stock market," a story in the International Herald Tribune, datelined Seoul, said last Friday, "and one man wrote a banner in his own blood, calling on the government to intervene to halt the slide."

Medium of speculation

A routine report on trade finance may provoke in you, as it did in us, a new dollar thought.

Capitalism backpedals

A postscript to the emerging markets theme. From the July 7 Journal of Commerce...

Greenback, go home!

The dollar suffered a new indignity on July 3 when the Central Bank of Chile switched the peso from the pure dollar standard to the dollar-mark-yen standard.

New triple-A risk

Just because the world has learned a little bit about credit risk, takeover risk and real-estate-speculation risk in the past few eventful years, that does not mean that anybody can relax for even one minute.

The word is 'illiquidity'

One day—we're sure of it—commercial real-estate prices will turn, because the marginal dollar will be entering the market, not breaking down the door trying to get out.

Good news in credit

Traders' lore has it that rising utility-stock prices foreshadow falling interest rates. Interest rates have fallen, of course, and utility-stock prices have risen. What has also been rising, much less visibly, is the creditworthiness of electric utility companies.

Tough-all-over dept.

The real-estate bear market has deepened in three countries and on two continents...

Building on the block

Now that the Democratic Party is packing its bags, New York can get back to the business of liquidating surplus real estate.

The bankers decline

"Maybe what we need now," a bond investor speculated, "is a Paul Volcker in reverse." In other words, let the funds rate go hang: Ease credit as audaciously as Volcker tightened.

July 3, 1992, Vol. 10, No. 13

The quietest bear market

Without stopping the presses of any known American newspaper, lay or financial, the dollar has been closing in on its all-time low.

Yield gap opens

Not only is the dollar-exchange rate down, but also non-dollar interest rates are up. As never before, an international investor is paid to hold one of the multicolored currencies -- nearly any currency at all, in fact, except the greenback.

New emerging market

There can be no suppressing the Brazilian entrepreneurial spirit.

'Full' of Treasurys

A Euro-subscriber who happened to be vacationing in New York was able to explain the ticker-tape-parade reception that the market accorded to a recent issue of Morgan Guaranty one-year notes.

Three-company race

In the last issue, a big question went begging for an answer. Were Graham and Dodd right or wrong in their analysis of one of the timeless investment problems? The year was 1949...

Ever so affordable

Unlike U.S. stock prices, copper prices, or even scrap-metal prices, new-home prices have not been rallying...

Gypsies hate it, too

More than a dozen years after gold peaked, people are still dreaming up new reasons to be bearish on it.

Indispensable Wall Street

From the May Survey of Current Business...

Pricing power preview

Only 18% of the members of the National Federation of Independent Business said that they plan to raise prices in the next several months...

Back to the future

Speculation has displaced caution (let alone atonement) as the overriding emotion in the junk-bond market this summer.

Money takes a snooze

If the monetary data mean what they say, the Federal Reserve Board has some explaining to do.

June 19, 1992, Vol. 10, No. 12

The monetary consequences of J. Ignacio Lopez

The name, in fact, is J. Ignacio López de Arriortua, and he is the newly elected vice president in charge of worldwide purchasing at General Motors.

Cow attacks butcher

"Publishers of The Charlotte Metro Foreclosure Report have closed the weekly newsletter because of mounting losses," The Business Journal of Charlotte, N.C., reports. •

Comparative chemistry

German short-term interest rates are more than twice as high as American short-term interest rates, and certain German equities are valued at a sharp discount to comparable U.S. equities. What are we, the readers of Grant's, going to do about it?

Tough-all-over dept.

County tax officials have lopped $47 million from the 1992 assessed value of Columbia Seafirst Center and $7.7 million from another downtown Seattle office tower, marking what one official says could be the start of a trend.

High fives

In the last issue, a man contended that the investment horizon of the bond market is shortening all the time. He said that creditors, losing confidence in the value of money or in the capacity of financial institutions, or both, are increasingly favoring short-term maturities.

The new Japan

Eight hundred employees and only 100 customers yesterday attended the grand opening of Japan's largest department store.

Swiss wore lamp shades

If it is any consolation to the Anglo-Saxons, Japanese and Scandinavians -- financial revelers all during the 1980s -- the stolid Swiss, too, now find themselves nursing a katzenjammer.

One less bank

Which is the more meaningful augury of money and banking, daily new highs in Bank of Boston or last week's closing of the failed American Savings Bank, White Plains, N.Y.?

Equitable sells stock

The deafening silence surrounding the new Equitable common-stock prospectus must be music to the ears of Equitable management.

Ask the IRS

Michael Evans, consulting economist, asks a simple, provocative question: If the Bureau of Labor Statistics and the Bureau of Economic Analysis can't reliably measure the growth in wages and salaries, who can? Why, the Internal Revenue Service can, he replies.

June 5, 1992, Vol. 10, No. 11

Eat my bread, sing my song

More and more, the financial condition of the nation's banks is colored olive drab. It is neither red nor black but government-issue green. Deposits are government-insured, of course, up to the legal ceiling, and have been since 1933.

Mortgage fever

Now it's the rich people's turn to complain to the Justice Department. Anyone who bought a high-priced house in a fancy neighborhood on either coast since 1987, and who has not yet refinanced his mortgage, may be in for a disappointment at the bank.

Debt blows up

The San Francisco Business Times, speculating on an unexplained explosion at the 20,000-square-foot house of a local real-estate developer...

'Highly confident'

John E. Keefe, a former Drexel Burnham Lambert employee [and] current paid-up subscriber to Grant's, describes his experience of checking on the market for certificates of beneficial interest in the Drexel Liquidating Trust...

No more spots

Consumer income is still weak and scrap-metal prices have turned down but the dry-cleaning business has snapped back.

Look out below!

The Charles I. Clough Jr. theory of interest rates is deflationary but hopeful. It is contrary, provocative and (up until this writing, at least) profit-making.

Look out above!

Martin Armstrong, chief economist of the Princeton Economic Institute, Princeton, N.J., is bearish on bonds, and he is more bearish than Charles I. Clough Jr. is bullish.

Laid-back swaps

Risk fairly oozes from the market in interest-rate swaps and financial derivatives. So say E. Gerald Corrigan, president of the Federal Reserve Bank of New York, and Alexandre Lamfalussy, general manager of the Bank for International Settlements... So says everybody, in fact, except for the people who make the markets.

The candidate's money

H. Ross Perot, the undeclared Ten Commandments candidate for the presidency, has sold short Citicorp, RJR and the Japanese stock market (or so it appears). He was opposed to the Iraq war, and he has kept his 10-figure fortune despite a demonstrated weakness for undeveloped Texas land in the midst of a worldwide asset deflation. Altogether, he seems a man of parts.

Enigma in a vault

The mystery of the money supply deepens. The Federal Reserve pushes and pulls but the aggregates only wheeze. The Fed continues to expand its balance sheet...

May 22, 1992, Vol. 10, No. 10

So many lunches, so little money

A man on the swap desk of a leading American bank told our Jay Diamond on Tuesday that a long-dated interest-rate swap with a Japanese bank had recently failed to pass credit muster with his superiors.

'Yields must fall'

Meet the average consumer of 1992: He's the slightly stooped fellow in the supermarket looking for bargains among the generic brands of table salt. If he looks preoccupied, it's because he is. His salary is scarcely growing and his job is insecure.

A light, Mr. Chips?

Municipal Mutual, the ninth-largest British general insurer, has been forced to seek financial assistance from other insurance companies following two years of heavy losses.

Up with deutschemarks

On May 11, The Times of London urged that the base lending rate be reduced to 6% or 7% from the prevailing, sky-high 10%. It said that the 9-3/4% deutschemark deposit rate should not stand in the way of this constructive policy...

Buyers' guide

Lately, the deutschemark has been appreciating against the dollar, but it has also had its sinking spells...

Precious convertibles

Let's just say, for argument's sake, that the Bundesbank goes the way of all flesh and the deutschemark the way of all unsecured paper money. What then? What now, as a hedge against those contingencies?

New banking risk?

In 1933, Jesse H. Jones, chairman of the Reconstruction Finance Corp., exhorted the nation's bankers to lend. "It is easy to say 'no,' " said Jones with a touch of menace...

Finance on the march

Emissaries from the American Stock Exchange, Chicago Board of Trade and Chicago Mercantile Exchange were the featured speakers at the Brazil Futures and Options Workshop...

Japanese reprise

Concerning the new aversion of American banks to Japanese names in the interest-rate swap market, Fitch is out with a new and eye-opening report, "Japanese Bank Capital Under Stress."

May 8, 1992, Vol. 10, No. 09

In flight from the mob

Fearless in speculation, Wall Street will do anything with money, even its own. What it will not do, as the events of last Friday proved, is stay at its post in the face of a perceived threat to its life and limb.

Kondratieff flies Delta

Whatever the late, famed, Russian economist Nikolai Kondratieff would have said, we say that no mere business cycle can account for the deepening troubles of the airline industry.

Why not platinum?

"Dear Ms. Grant," the letter started out, "...[W]e don't invite most people to apply for the American Express Card. We are inviting you." Emily Grant, the addressee, is 11 years old, going on 12, but she is highly responsible and almost ready for nighttime baby-sitting.

Bankers on strike

The monetary data continue to harken back to the middle Roosevelt years. As the Federal Reserve heaves and hauls, commercial bankers stare into space or passively buy the two-year Treasury note...

'You're fired'

Permanent corporate staff reductions have continued to mount this spring as initial claims for state unemployment insurance have fallen. A little like the softness in M-2, persistent announcements of job cutbacks suggest that all is not well in the national economy...

Final frontier?

The William J. O'Neill investment strategy has crossed the Pacific and infiltrated China, according to The Washington Post.

Rate this government

The bigger the deficit, traders will say, the better it is for the Treasury market. The more deflationary the business climate, the more accommodative the Federal Reserve. Therefore, a big deficit in a recession is better than a little deficit in an expansion. This is the trading floor gospel, but it has not produced many trading profits in 1992.

The Fed works alone

George Smoot, the physicist who solved the mysteries of the universe, told The Wall Street Journal that he relaxes by playing the stock market.

April 24, 1992, Vol. 10, No. 08

Cyclical meets secular

All of them, components of the Commodity Research Bureau spot price index, have rallied lately.. So has the price of gypsum wallboard, the long- depressed house-building staple (page two). And so, incredibly, for one complete day, April 21, did the price of gold, the even-longer-depressed monetary staple....

No worry allowed

If nothing else in Japan is going up, interest rates are, and the prime rate might be going up next month.

High yields — again!

Like a man with a past, the junk bond market is back on its best behavior. The new-issue calendar is building and prices are rising.

The slowest asset

In Houston, office rents are falling again, fully a decade after the Texas energy business stopped inflating and began deflating. Rents continue to fall in New York, too, and Citibank is reportedly trying to sell the mortgage it holds on 40 Wall St. at a distress price....

Alan Greenspan, chartist

To John W. Schulz, of Brean Murray, Foster Securities Inc., goes the award for the best piece of Fed watching so far in 1992.

April 10, 1992, Vol. 10, No. 07

Newspaper reading induces insanity

According to Monday's Wall Street Journal, the collapse of Japanese stocks has nothing to do with Americans. It said so right at the top of page one.

Up-and-coming bulls

A Georgia high school economics class is learning how the stock market really works...

Yield to paradise

Is there even one residual doubt about the economic recovery? The verdict of the corporate bond market (as distinct from the verdict at Grant's) is no.

Insurance election

In 1905, the Equitable Life Assurance Society of the United States "mutualized"; ownership reverted to the policyholders. In 1992, the company will almost certainly "demutualize"; ownership will revert to the stockholders. But what will the stockholders own?

Bad stories well-told

Heron International, the U.K.-based global real estate company, told an emergency meeting of its bankers last Friday that it was writing off three-quarters of its net worth.

Risk: the bottom line

One of the many potentially hair-bleaching surprises awaiting Olympia & York's lenders next week is a look at the developer's book of "derivatives"...

Change of address

Grant's Interest Rate Observer is moving its headquarters to 30 Wall St., the old United States Assay Office...

Money down, commodities up

Industrial commodity prices have begun to move up, a sign that something is stirring somewhere. No such augury is apparent in money supply, however...

March 27, 1992, Vol. 10, No. 06

Flying buildings go public

John Templeton, the visionary bull, told a visitor recently (and the visitor told Grant's) that the news has rarely been more hopeful and the equity market has rarely seemed more picked-over.

Soup on garments

Federal Express last week reported better February air-traffic results, paced by a hopeful rise in premium, "Priority Overnight" billings....

Where the money is

To put Alan Greenberg's 1991 pay in perspective...

Letter to the editor

Our July 6, 1990, story on Olympia & York seemed heretical when it was published, and John E. Zuccotti, president of O&Y Cos. (U.S.A.), fired off a rocket in reply. After upbraiding us on certain factual matters, Zuccotti turned to the broader, philosophical issues. We have never quoted from that letter -- until now.

Yield at a premium

Knowing that, an investor will be ready to accept a new, amended, efficient-markets hypothesis: Markets are efficient except when they're deranged.

Class acts retreat

Is the real-estate market running out of bad news? Not yet, we think, and our authority this month is a Texas investor who laughed out loud when...

Deflation in Denver

From the March 6 Denver Business Journal, the March 16 Charlotte (N.C.) Business Journal . . . and in California

Why Cuomo stayed home

In reply to a tough new Citizens Budget Commission report on New York State's beet-red deficits, a ranking executive-branch official has replied, in effect, that reform is impossible.

Florins and photons

With your indulgence, we will now compare the coins of Renaissance Florence to the dollars of modern, GOP America. We will appraise the space-age dollar -- a mere photon on a computer net -- alongside the fiorino d'oro, which weighed 3.53 grams and clinked when dropped on a counter.

Quoted market prices of sovereign debt

M-1 lifts off

March 13, 1992, Vol. 10, No. 05

Not as easy as advertised

A reader asks: If the Federal Reserve reduced bank reserve requirements while the Federal Deposit Insurance Corp. raised bank insurance premiums, what would be the net effect on monetary policy? Would it be as accommodative as it seems?

Yo, stock

As times change, so do fashions in corporate finance. Nowadays, equity capital is cheap and abundant. It is lying on sidewalks, piling up in mailboxes and falling out of pants pockets...

Gold: the German theory

Up went the German inflation numbers last Friday, and down went the gold price. Was there any connection?

$50 a share? (Not!)

Merrill Lynch is bullish on Bethlehem Steel, the stock, but not on Bethlehem Steel, the company. On the company it is frankly guarded.

4.63 times book

On Sunday night, a group of Mexican investors won a privatization auction for a medium-sized Mexican bank with an astonishing bid of $846 million, or 29 times last year's earnings. —The next day, the euphoria disappeared with the disclosure that the leading investor had overbid andsdf had to back out of the deal.

What if earnings rise?

Everybody knows that corporate profits are not directly and perfectly related to corporate-stock prices. But are they inversely related?

Global monetary cooling

World money supply remains stagnant in January—and there must be a reason for it. Maybe it has to do with the lending capacity of the world banking system.

New York on notice

Nothing is wrong with the budget of the State of New York that a central bank could not adjust.

They were bullish

"The economic recovery: where, when, how?" were the questions, and the answers from the Grant's conference last week were: in the United States, now, and for the usual reasons. The consensus of the speakers was that a cyclical recovery was at hand.

Credit-crunch ingenuity

In capitalism, problems inspire solutions, and the problem of the debt contraction is prompting the organization of Chesapeake Credit Guarantee, Baltimore.

Pick your data

More than ever, any competent analyst may build any imaginable scenario from the monetary statistics presented on these pages.

February 28, 1992, Vol. 10, No. 04

For lower yields

The bond market is inconsolable. It lies around in bed all day, won't eat and refuses to come to the telephone. It flies off the handle at bad news and won't listen to good news.

Debt: the movie

A movie about personal bankruptcy opened last month in Japan. "Yonigeya-honpo," meaning Credit-Escape Agent, is a feature film with a documentary message.

Japanese house slide

Altogether, the Japanese debt contraction is proceeding along conventional lines. It is bearish for stocks, real estate and -- increasingly, it seems -- business activity.

Buy one, sell another

Let's assume that the next order of business is a normal, postwar, GOP-issue, election-year, cyclical recovery. In the usual, time-tested way, prices will rise, including the prices of base metals...w

Money-supply illusion

Depending on the month and the year, M-2 is up, or it is down, or it is in the shop for revision. Before the latest recount, which the Federal Reserve disclosed on February 13, growth of the broader aggregates was weak. Now it is stronger.

Big depositors, beware

The FDIC's advice to the risk-averse bank depositor has long been: Don't take chances with more than $100,000. With the recent enactment of the FDIC Improvement Act, that suggestion has become more pointed.

'Earnings power'

"In the debt boom," said our anonymous, sore, short-selling source, "they talked about 'private market value.' Now they talk about 'earnings power.'"

Corrected yield

The dividend yield on Apex Mutual Fund was incorrectly given in the last issue. The number should have been 7.9%.

Bank credit: any minute now?

Either the recovery is here or it isn't. We think it isn't, and we're struck more and more by the weakness abroad.

February 14, 1992, Vol. 10, No. 03

The bank failure that nobody noticed

When the Landmark Bank of Fort Worth (assets: $82.3 million) bit the dust on February 6, no waves were made, financial or journalistic. Bank failures in Texas are as common as dirt...

Monetary Euro-symbol

Starting this week, gold will be accepted as a settlement currency in the Euroclear System. It will be treated much like any other currency, our sources report, and it may be used for settlement of securities transactions and money-transfer operations...

High-yield commodities

The story last issue on BP Prudhoe Bay Royalty Trust, the common stock with the 12% dividend yield, elicited a call from a skeptical reader. If you're going to be bullish on oil, he asked, why not buy oil?

Chrysler on faith

Two very different questions, put to Chrysler Corp. and Chrysler Financial Corp. by associate publisher Jay Diamond last week, elicited identical answers: "No comment," the companies, parent and finance subsidiary, said twice.

Stocks did fall once

As an antidote to the slogan that stocks invariably provide a superior return over any imaginable investment horizon, a Cambridge (Mass.) investor, Nathaniel B. Guild, has collected some facts and figures.

Banking on excess

In 1991, the nation's big banks bought government securities and issued equity capital. In New York, the big six banks (formerly seven) cut the growth in their operating expenses to an annual rate of 6%. Down from an average of almost 15% a year in the second half of the late, great 1980s. In general, banks last year became more liquid and less fragile. Did they therefore become less disaster-prone?

CHIPS volume explodes

On an average day in January, the Clearing House Interbank Payments System was the conduit for $958.8 billion in interbank dollar transfers worldwide.

Tax-exempt froth

Municipal-bond funds now constitute the biggest force by far in the tax-exempt bond market, according to the latest Federal Reserve flow-of-funds report.

World money market rates

More credit, more money

The rally in the U.S. monetary aggregates over the past several weeks has more than erased December's losses.

January 31, 1992, Vol. 10, No. 02

A gnome speaks out

A successful midtown-Manhattan investor called his bookie a week ago to ask about the Super Bowl

Money-green denim

According to Shad Rowe, our Dallas correspondent, the stock market is now the lender of last resort.

The greater excess

When the Feshbach brothers, flamboyant bears, bought an airplane late in 1990 to lighten the burden of their intercity travel, that was a sign that the cottage industry of short-selling was ripe for a setback. The "setback" turned out to be one of the greatest bull markets in the history of stocks and bonds.

Auto debt buster

"We have never seen such low interest rates and low car sales at the same time," Frank McCarthy, executive vice president of the National Automobile Dealers Association...s

Stocks at a premium

Valuation data for the Standard & Poor's and Dow Jones indices are distributed far and wide...

Deflation marches on

Specialty Equipment Cos., a Belvidere (Ill.)-based manufacturer of yogurt-making machinery, now operating under bankruptcy protection, is a case study of one of the accidental social benefits of the leveraged-buyout movement.

The yield is 11 .94%

Let's say that the economy is on the mend, deflation is yesterday's problem and commodity prices are going to rally any day. What then?

Emaciated markets

A New York foreign-currency investor reports that markets are becoming thinner. There are fewer banks in the business of buying and selling foreign exchange. There is more price volatility than ever before and bid-and-ask spreads are wider than they used to be.

Total return box score

Cyclical, secular, speculative

Housing starts are turning up, but not so the price of the building material that highly leveraged companies manufacture.

January 17, 1992, Vol. 10, No. 01

Investing in the Kingdom of Heaven

It is no special indictment of Bretton Woods to say that it failed. Every earthly system falls by the wayside eventually. What superseded Bretton Woods was inflation, turmoil and muddling through. It was no system at all, and it produced no brilliant financial results.

Say 'buy,' then 'cheese'

Well, he looks sincere

If Alan Greenspan isn't worried about inflation, should you be?

Near and far report

Asked last Friday at a joint session of the Senate Banking and Budget committees if the Federal Reserve's accommodative policy was working, Greenspan gave a not-quite lucid answer.

We already own it

William C. Dunkelberg, chief economist of the National Federation of Independent Business, has distilled the debt theory of the current recession into the fewest possible words. "There's too much stuff," he said...

Credit union flash

The latest from the National Association of Letter Carriers Credit Union, Amityville, N.Y.: Payroll savings deductions are up by 15% to 20% year-over-year. Why? "I think they are worried about the future," says Pat Antonacci, the credit union's treasurer...

Mutual Benefit's long row

Victor Palmieri, quoted above in our "how's business?" feature, is also the deputy rehabilitator and chief executive officer of Mutual Benefit Life Insurance Co., the nearly 150-year-old New Jersey institution that survived everything except the 1980s...

Roll of the dice

Recessions are healing events. The pain is purposeful rather than random (particularly so, as a cynic might say, when it happens to others). In capitalism, the macroeconomic patient usually recovers.

Absolutely no momentum

Although the customers of HPSC went to dental school, which is some-what similar to medical school, which trains the professionals who have staffed some of the nation's great biotech companies, the over-the-counter leasing company has none of the Mach 2 properties of a typical health-care stock. q

Deflation tax cut

"Long after commercial real-estate values plunged in the mid-'80s," reported the year-end edition of Best of the Dallas Business Journal, "commercial property owners continue to file an avalanche of appeals aimed at driving values down.

Standing watch over the money supply

One of the only stocks in America that has not been going up is the money stock. M-1, the narrowly defined, bill-paying aggregate (cash, demand deposits, NOW accounts), is the exception that proves the rule. Over the latest three months, it has risen at the brisk annual rate of 12.9%.

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